Antitrust lawyers rarely get to claim bragging rights for working on the hardest-fought part of a headline-grabbing merger. That generally falls to the bankers, then the deal lawyers. Competition lawyers are the poor relations, overseeing the legal manoeuvres to get the deals rubber-stamped by antitrust regulators.
But as the deal market grows more competitive, with activist investors lobbying to drive up bid prices and company rivals looking for ways to meddle, the role of antitrust lawyers has become more influential.
In two recent high-profile transactions, it was the competition lawyers who were left to grapple with how to get a merger completed when rivals were seeking to disrupt the process. Their experiences show that while competition regulation is not a particularly dynamic area, the complexities of getting deals approved is increasing as third parties prove intent on disruption.
For the Freshfields Bruckhaus Deringer team advising BT Group in its £12.5bn takeover of EE, to create the UK’s largest telecoms provider, it seemed every competitor in the market weighed in. The Competition & Markets Authority, the national antitrust regulator, heard submissions from Vodafone, TalkTalk, Three, O2 and about a dozen others.
In an effort to make the process go faster, and lessen the time BT’s rivals would have to lobby against the merger, the Freshfields lawyers asked the CMA to fast-track the case from an initial review to “Phase 2”, an in-depth investigation of whether a deal could hinder competition in its sector.
It was the first time in the CMA’s brief history that strategy had been deployed, says Rod Carlton, the Freshfields partner who led the team advising BT. “All the other mobile network operators as well as Sky, Virgin, TalkTalk and others were lining up to fire bullets at the transaction and to make trouble,” he says. “We took a long time strategising on how best to deal with that. We had some 15 parties fighting us in front of the CMA pretty much every step of the way.”
The CMA came up with 10 “theories of harm” on how the deal could affect competition in the market.
Rivals can weigh in during a Phase 2 investigation — and plenty did. The CMA received some 50 submissions — many more than usual — from third parties expressing a view on the proposed deal. One even challenged BT’s request to fast-track the approval to a fully fledged investigation.
The Freshfields team “responded forensically” to each submission, giving a sometimes line-by-line deconstruction of the arguments to minimise possible areas of dispute.
Some of the third parties “also overcooked their arguments, raising objections that were less to do with this particular merger than with broader regulatory battles the third parties were simultaneously waging against BT with Ofcom and on other fronts”, Mr Carlton adds.
Timing mattered on a separate front, too. Another proposed deal — Hutchison 3G’s attempt to acquire O2 — was working its way through the European Commission’s antitrust approval process in Brussels. The team realised that if it was approved before the BT and EE deal, it could lead to further industry consolidation that might hurt BT’s arguments that its deal with EE would not reduce competition in the UK market.
“What made it particularly nail-biting was [the question] against what kind of backdrop should each be analysed?” Mr Carlton says. “Should the BT deal be analysed on the assumption that the other deal had already gone through?”
BT’s acquisition completed in early 2016.
Another recent deal shows the long-term view involved in a case that is heavily affected by regulation. Aer Lingus faced a more challenging opponent than BT’s competitors: it took nine years to get rival airline Ryanair off its share register.
When the Irish government listed Aer Lingus in 2006, Ryanair built up a stake, hoping to merge the two airlines. Over three years, Ryanair launched several attempts to buy its rival but was thwarted on antitrust grounds. When in 2007 Aer Lingus first tried to force Ryanair to sell its stake before the European Commission, it failed.
The Cadwalader, Wickersham & Taft team advising Aer Lingus spent the next eight years, in forums spanning London, Brussels and Washington, launching and defending legal challenges that ultimately forced Ryanair to sell its stake last year. That paved the way for a €1.4bn takeover of Aer Lingus by International Airlines Group, the owner of British Airways and Iberia, which bought the stake from Ryanair.
“The IAG part is only the happy ending — IAG came into the story in the last chapter,” says Alec Burnside, the Cadwalader partner in Brussels who advised on the deal. “For eight years the story was the dogfight between Ryanair and Aer Lingus.”
He adds: “Aer Lingus had [Ryanair chief executive Michael] O’Leary’s tanks, or aeroplanes, parked on their lawn within days of the IPO. Rather than the beginning of a bright tomorrow, it was the start of a long headache.”
At times, Ryanair’s fight appeared tactical, to thwart its rival, but it also became a personal crusade by Mr O’Leary, says Mr Burnside. “Some of the arguments they made on points of law could barely be made with a straight face,” Mr Burnside says. “And the delay is a prize in itself.”
It all came to a head during a 29-hour period in July last year, when judgments and clearances began tumbling in Aer Lingus’s favour. The European Commission, the Competition Appeal Tribunal, the CMA, the UK Supreme Court and the US Department of Justice weighed in. “All the seeds we had sown started to sprout one after the other, so fast we didn’t even have time to read all the judgments,” Mr Burnside says.
An associate who worked with Mr Burnside for Aer Lingus, Marjolein De Backer, has spent her whole career so far on this project. When it was all over, the Cadwalader and Aer Lingus teams dined in Dublin, toasting the victory with Irish whiskey.
“I’ve had clients who have been with me for longer, but I’ve never had a client whose problem took a decade to solve,” Mr Burnside says.