M&A Activity in the Connect Vehicles sector: More Antitrust Filings on the Horizon?
M&A activity in the connected vehicles sector might need to be notified to antitrust authorities, even when the target has limited revenues, as shown by the recent Intel/Mobileye deal.
Connected vehicles (or, taking it one step further, self-driving cars) are computers on wheels and represent a rapidly changing area raising major challenges – including compliance with legal and regulatory obligations. The future mergers and acquisitions between car manufacturers and suppliers, technology companies, insurers and/or others might need to be notified to the different antitrust/merger control authorities around the world, even when the target in these deals has limited revenues.
Under merger control rules, a merger filing is usually required when the merging parties have significant local revenues or local asset levels in a certain country or jurisdiction. However, some jurisdictions – such as the European Commission, Germany and Austria – are examining whether certain high-value transactions (i.e. with a high price tag) involving targets with no or low local revenues may have a significant impact on competition in the jurisdiction and, if so, whether to modify their merger notification thresholds to address this limited class of transactions.
Intel has recently entered the self-driving car sector through the acquisition for over US$ 15 billion of Mobileye, an Israeli company making sensors and cameras for self-driving cars. With the acquisition, Intel enters the sensors and chips manufacturing in the automotive industry along with Google and Uber that have already invested in their own technology in the field. While the deal price is very high (over US$ 15 billion), Mobileye global revenues are limited (just above US$ 358 million in 2016). While this time the Intel/Mobileye deal is not being notified in Europe (neither at the EU level to the European Commission, nor at the Member State level to national antitrust agencies), future deals might have a different outcome and have be notified (see here recent press on the topic). Germany and Austria have already proposed reforms of their merger notification thresholds to be able to review deals mainly based on the purchase price (along with some other requirements to make sure that there is a material nexus to their territory). And the European Commission has recently completed a consultation where it had asked various industry stakeholders whether they agree that the EU should change its merger control rules to allow notifications in case of deals with a high purchase price, even when the target has limited presence in terms revenues in Europe (here is our response to the Commission’s consultation).
The German and the Austrian reforms will enter into force soon, and the European Commission is to release its findings on the consultation soon. Other jurisdictions may follow this path. One thing is certain today: any future mergers in the automotive sector will have to be carefully assessed to determine possible merger filings to antitrust authorities around the world.