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China Passes Merger Review Law
Investors celebrate set standards for merger review, and lower threshold than was expected.
August 5, 2008
On Monday, China released the results of a State Council meeting in which a new draft of antitrust laws was approved that would significantly alter the M&A environment in the east Asian republic.
An earlier draft of the legislation was released in March, prompting many deal pros to openly express reservation with an item in the legislation that would have set the threshold of scrutiny at any deal involving a company with sales over $40 million. Under the approved rules, only deals with two or more companies which have a revenue in China of more than 400 million yuan ($58 million) and a combined global revenue of over 10 billion yuan (approximately $1.5 billion) will prompt merger review.
The enactment of a fixed standard for merger review in China is viewed as a positive development for a global economy, despite investors’ initial concerns that a low threshold for scrutiny would have inversely impacted even the lower end of the middle market. These concerns were allayed by the significantly lower cap to trigger merger review.
Additional regulations are anticipated in the next several months to further specify the new legislation.
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