CRD VI consequences for M&A transactions

Key takeaways

Timing 

Firms will need to build in time to obtain approvals when buying or selling material/qualifying holdings or carrying out mergers and demergers. They should also be prepared to answer additional questions from supervisors efficiently to avoid stalling the assessment. 

Training and policies and procedures

To support interactions with supervisors and ensure compliance, firms may wish to provide training for their internal teams on the requirements of the CRD VI regime. They will likely also need to develop policies and procedures to comply with notification requirements for each relevant transaction. We expect firms will already have policies in place for the qualifying holdings regime, which should be reviewed to reflect the changes under CRD VI and, where appropriate, adapted to capture the broader range of transactions—in particular, the material holdings regime which may overlap with qualifying holdings requirements.

Communication with supervisors 

Although CRD VI is aiming for a harmonized approach, member state jurisdictions are likely to vary in their implementation of the requirements, and it remains to be seen how different supervisors will manage their assessment processes. Past experience with the qualifying holdings regime could provide an indication of the approach member states will take. Where appropriate, firms may want to communicate early with supervisors on their plans and take advantage of any guidance given to ensure processes flow smoothly. 

Ongoing ambiguity 

Certain aspects of the rules are still ambiguous or subject to ongoing consideration by member states as part of their transposition process. One such example is whether all mergers/divisions should be in-scope or should be subject to a threshold (e.g., transfer of at least a certain percentage of the supervised entity’s assets into the merged or demerged entit(y/ies)). Until member states or the EBA publish further guidance on such gray areas, firms should ensure they clearly explain the reasoning behind any ambiguous aspects of their notifications and, as above, communicate with supervisors as needed.

Challenge of local implementation 

Some of the newly introduced assessment criteria may lend themselves to divergent interpretation across the EU absent effective coordination. Among these, the requirement that the implementation plan for an envisaged merger be “realistic and sound” from a prudential standpoint is likely to attract scrutiny. Once the RTS are finalized, member states will need to ensure uniform application of these standards. Jurisdictions with established, repeatedly tested regulatory frameworks for mergers and divisions may offer inspiration to support a consistent rollout.

Download the full article for more detail on the requirements of the regime for each transaction subject to the CRD VI rules.