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Hungary’s M&A market sees fundamental change

Rules on mergers and acquisitions are being fundamentally changed in Hungary with recent amendments to  competition law passed by Parliament in December, according to a press statement sent to the Budapest Business Journal today by Hegymegi-Barakonyi és Társa Baker & McKenzie Law Firm.

Compared to the earlier practice when an M&A deal needed to be approved by the Hungarian Competition Authority (GVH) if at least two firms involved had more than HUF 500 million net revenues the previous year, now the threshold is set at HUF 1 billion. In addition,  no approval is needed from the GVH, but the authority needs only to be notified. According to Baker & McKenzie, in the new regulatory environment, therefore, many deals might go unnoticed when bigger investors purchase SMEs or smaller firms.

Another factor in decreasing the number of notifications, the firm says, is that in the case of Hungarian companies, only revenues from Hungarian operations need to be taken into consideration.

In the event that a fusion clearly does not raise issues in terms of competition law, a speedy procedure can be requested through paying a fee of HUF 1 million, which can shorten the 30-day deadline to eight days. According to B&M, this increases the importance of the so-called pre-notification phase of M&As, when the parties in the deal, with the help of consultants, are able to conduct informal negotiations with the GVH in order to get the necessary paperwork done properly.

“While the amendments bring many alleviations, they also enable the GVH to conduct on-site probes of the companies involved without prior notice … which can pose a risk to market players,” according to Zoltán Hegymegi-Barakonyi, head of B&M’s Budapest office. The authority will be able to conduct a so-called “dawn raid” if the transaction is carried out without the consent of the GVH or the parties provide inappropriate data to the watchdog, he added. Should such a probe occur, the authority is entitled to collect and take away the necessary paperwork, and if shortcomings are found fines may be issued.

Despite the doubled threshold for mergers, the authority is also empowered to monitor and prohibit deals that fall under the threshold if the net revenues of the two firms merging together exceeded HUF 5 bln in the preceding year.