Saudi Arabia’s Merger Filings and Evolving Conditional Approval Procedures

Latest Developments: Saudi Arabia's Merger Filings and Evolving Conditional Approval Procedures

Saudi Arabia's General Authority for Competition has unveiled significant modifications to its merger control notification requirements. The latest amendments introduce a new local nexus test and establish specific minimum turnover thresholds for both the entities being acquired and the aggregate global annual revenues of the controlling groups involved in the transaction.

The General Authority for Competition (“GAC”) has been steadily refining its merger control regime and playing an increasingly active role in enforcement efforts since the Saudi Competition Law came into force in 2019.

If a party's turnover exceeds the threshold, they must obtain GAC clearance to participate in a "Economic Concentration," which is defined as the transfer of shares, assets, or rights from one entity to another that results in a change of control or decisive influence over the target entity, or the establishment of joint control over a full-function joint venture.

As of November 1, 2023, the GAC has implemented new thresholds, incorporating additional criteria that raise the bar for triggering a filing obligation in Saudi Arabia. Under the revised guidelines, a transaction would be subject to notification if it meets all of the following turnover thresholds:

1. The combined annual worldwide turnover of the transaction parties exceeds SAR200 million

(approx. USD53.3 million).

2. Annual worldwide turnover of the target exceeds SAR40 million (approx. USD10.6 million).

3. The combined annual turnover of the transaction parties in Saudi Arabia exceeds SAR40

million (approx. USD10.6 million).

The changes indeed specifically concern the notification process for mergers and acquisitions.

The new thresholds are meant to determine when a merger or acquisition must be notified to the GAC. The new guidelines suggests that a filing might still be necessary even if the target entity does not operate within Saudi Arabia. This is particularly relevant for transactions that have parties with significant turnover in Saudi Arabia or those that could potentially affect the Saudi market. For example, the local nexus test will apply to foreign-to-foreign transactions and they could be subject to notification requirements based on their potential impact on the Saudi market, even if the direct activities within Saudi Arabia are minimal.

The revised thresholds are indeed anticipated to reduce the volume of unnecessary filings. By increasing the revenue thresholds for notification, the GAC aims to focus on more significant transactions that have the potential to impact competition within Saudi Arabia, while exempting smaller transactions with limited or no local nexus.

In summary, while the new guidelines aim to streamline the notification process and focus on more impactful transactions, they also maintain a broad scope that could encompass transactions with indirect or potential impacts on the Saudi market. This approach reflects a balance between regulatory oversight and the practicality of the merger control process.