This policy brief raises two questions about foreign takeovers: (1) is thelikelihood of domestic welfare loss greater when a foreign investor buys anational company? (2) are economic concerns legitimate reasons that

could justify interference by memberstates in the European Commission’scurrent approach to cross-border merg-ers? A thorough analysis of the literaturesuggests that the answer to both ques-tions is no. Granting leeway to memberstates is unnecessary and potentiallyharmful, given the increased uncertaintyabout outcomes. In order to increasetransparency and stimulate foreigninvestment in Europe, the Commissionshould clarify the parameters of permis-sible intervention by member states.

FOREIGN TAKEOVERSNEED CLARITY FROMEUROPE

bruegelpolicybriefISSUE 2014/07DECEMBER 2014

by Mario Mariniello Research Fellow at Bruegel

mario.mariniello@bruegel.org

POLICY CHALLENGE

THE ISSUE Foreign takeovers are often a source of concern for national gov-ernments. Concerns might be of a strategic nature (for example in cases ofdeals in the defence sector) or of a more economic nature. In these cases,the public perception is often that a foreign investor, being less physicallyor psychologically attached to the host country, could more easily takedecisions that would harm the economy, such as downgrading the acquiredcompany’s brand or cutting jobs or research expenditure. However, the onlyconsideration in merger assessment that matters for the European Com-mission, which is responsible for cross-border merger control in the EU, iswhether the merger will harm consumers. Member states can interveneonly in exceptional circumstances.

Source: Bruegel based on FATS/Eurostat. Note: darker shading indicates a higher ratio of turnover ofcompanies with non-domestic ownership, compared to turnover of companies with domestic owner-ship, ranging from 12% (Cyprus) to 123% (Ireland). Data for Malta and Greece is missing. See Table 1.

Foreign ownershipof EU member statecompanies

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FOREIGN TAKEOVERS NEED CLARITY FROM EUROPE

1. Article 1, CouncilRegulation (EC) No

139/2004 of 20January 2004 on the

control ofconcentrations between

undertakings(abbreviated to EUMR).

The Commission hasjurisdiction over

mergers of ‘communitydimension’; mergers do

not have communitydimension if all involvedundertakings have more

than two-thirds of theiraggregate EU turnover

within a single memberstate.

IN 2010, when United States foodgroup Kraft purchased Britishchocolate maker Cadbury, thetakeover was in part facilitated byan undertaking from Kraft that itwould reverse a Cadbury decisionto relocate some production fromthe United Kingdom to Poland.After the merger, however, Kraftwent ahead with the plan to moveproduction to Warsaw.

Such events can make politicianswary of foreign takeovers. In theUK, similar concerns arose inspring 2014 when US companyPfizer attempted to buy Britain’sAstraZeneca. The UK govern-ment‘s concern was to avoid lossof R&D jobs following the deal. Inthis case, however, Pfizer ulti-mately dropped its offer and themerger did not take place.

Calls for government interventionto protect the public interestwhen a foreign investor attemptsto buy a national brand are fre-quent in Europe. However,mergers of significant size thatinvolve companies of differentorigins, whether EU or non-EUcompanies, are normally subjectto scrutiny by the European Com-mission in its role of antitrustauthority1 and national govern-ments are not supposed to play arole. This might create some inter-institutional tension since theguiding principle followed by theCommission during its mergerassessments is to uphold theinterest of the consumer only,while national government mightpursue other interests. No othercriteria can affect the Commis-sion‘s decision. For example,rationalised production, reducedmarginal costs of production andconsequent lower market prices

National concerns are often of apresumed economic nature.There is a general perception thata foreign investor would be lessphysically or psychologicallyattached to the host economy,that it would be easier for the for-eign investor to close down theheadquarters of the acquiredcompany, that the foreigninvestor could have an interest indowngrading national brands thatcompete on the same markets orthat it would be less sensitive totrade-unions or to political pres-sure to preserve jobs in thecountry. Such views can becomeeven more prevalent in time ofeconomic crisis. And the EUMRdoes not fully close the door toaction by national government. Inaddition to public security, plural-ity of the media and prudentialrules, the Commission may recog-nise other ‘public interests’ aslegitimate if compatible with theprinciples of EU law.

8

8

14

14

8

4

4

0 2 4 6 8 10 12 14

Deals completed

Deals not completed

Other

Economic concerns

EU buyer

Non-EU buyer

Economic concerns

Other

Other

Economic concerns

6

Source: Bruegel. Note: cases in the sample were identified through a review of the literature onforeign takeovers and merger control in Europe. Because sometimes those cases are notexplicitly publicly reported, the list is not exhaustive. The sample includes the following cases:BSCH/A.Champalimaud, Secil/Holderbank/Cimpor, Thomson-CSF/Racal, Novartis/Aventis, ABNAmro/Banca Antonveneta, BBVA/BNL, Unicredito/HVB, Danone/PepsiCo, Enel/Suez,E.ON/Endesa, Abertis/Autostrade, Mittal/Arcelor, Gazprom/Centrica, MAN/Scania,Enel/Acciona/Endesa, AT&T/Telecom Italia, Air France-KLM/Alitalia, Kraft Foods/Cadbury,Lactalis/Parmalat, Edison/EdF, GE/Alstom, Pfizer/AstraZeneca. Economic concerns areidentified if concerns about the effect of the merger on productivity, jobs or R&D by keyplayers such as members of the government, the national parliament or trade unions werereported in the contemporary media.

Figure 1: Number of major EU cross-border mergers in which buyer‘snationality triggered government intervention (1999-2014)

might be sufficient conditions formerger clearance. That the ratio-nalisation might also entailredundancies is not relevant tothe Commission’s assessment.This does not mean that the Com-mission believes that these arenegligible issues that should beignored. Rather, it is believed thatin such situations other institu-tional instruments (such asredistribution and employmentpolicies) are more appropriatethan antitrust control.

In certain cases – when themerger affects public security,plurality of the media or pruden-tial rules – national governmentsare allowed to intervene and toimpose conditions on mergersthat fall under the Commission’sjurisdiction (Article 21 of the Euro-pean Union Merger Regulation,EUMR; see also Röller and Véron,2008, for a thorough discussionof security concerns in mergercontrol).

FOREIGN TAKEOVERS NEED CLARITY FROM EUROPE

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2. In E.ON/Endesa, forexample, the Spanish

energy regulatorimposed a number of

‘public interest’ condi-tions to clear the merger,including a commitment

by E.ON to maintainEndesa’s headquartersin Spain. The European

Commission challengedthe decision of the

Spanish authorities atthe European Court of

Justice, which ruled thatSpain was in breach of

EU law. However, thejudgement was handed

down more than twoyears after E.ON had

started the acquisitionprocess. During that

period, E.ON dropped themerger offer.

3. UNCTAD, WorldInvestment Report

statistics 2013, page67, tables C and E,

http://unctad.org/en/PublicationsLibrary/w

ir2013_en.pdf.

4. We consider mergersresulting in a change ofcontrol, and do not con-sider simple changes in

the composition of shareportfolios. We consider a

‘domestic merger’ to be amerger in which control

of a company passesfrom a resident investor

to another resident. A‘cross-border merger’ isa merger in which con-

trol passes from aresident investor to a

foreign investor.

nature should be considered ‘legit-imate’ grounds for nationalintervention in foreign takeovers.We consider the evidence aboutthe economic effects of foreigntakeovers, the potential costs ofgovernment interference aboveand beyond what is explicitlyallowed in the EUMR, and concludewith some recommendationsabout how the EU framework canbe made clearer.

ECONOMIC EFFECTS OF FOREIGNTAKEOVERS

Foreign direct investment (FDI)can take two forms: greenfieldinvestment, or the establishmentof new companies in the hosteconomy; and merger & acquisi-tion (M&A), or investment inexisting companies. Developedeconomies attract FDI mostly inthe form of M&A: approximately60 percent in 2011 (UNCTAD,2013)3. FDI thus partly involves aloss of control over domesticcompanies to the benefit of for-eign investors4. Figure 2compares EU28 cross-border anddomestic M&A trends when thedeal implied the acquisition of amajority stake in a target com-pany. Acquisitions by Europeancompanies peaked in 2000,

reaching comparable levels tomerger activity in the US (acquisi-tions by US companies peakedthree years earlier, partly explain-ing why the line representingacquisitions by non-EU compa-nies has a smoother shape). Inthe last 25 years, mergersbetween companies from thesame EU country represented halfof the total merger deals, while 18percent were cross-border merg-ers within the EU. The remainingdeals involve non-European com-panies. Notably, as of the start ofthe crisis in 2008, EU cross-border merger deals tended to befewer than deals involving non-EUcompanies, reversing the pasttendency of per-year EU cross-border deals often outnumberingnon-EU deals.

EU companies tend to be pur-chased by non-EU companies asmuch as EU companies acquirenon-EU ones, ie in 16 percent ofcases. Not surprisingly, though,cross-border mergers tend to belarger in size; therefore their rele-vance ramps up if the comparisonis made on the basis of dealvalue: on average, cross-borderdeals within EU are 71 percentbigger than domestic mergers,and cross-border extra-EU deals

Figure 1 shows the number ofmajor attempted cross-borderdeals in the EU in the last 15years, in which the buyer’s nation-ality prompted governmentintervention. In 14 out of 22cases, economic concerns (suchas fears about job cuts or produc-tivity losses) played a role. Inmost cases over which economicconcerns were expressed, themerger ultimately did not takeplace. While a direct causal linkbetween economic concerns anda deal‘s outcome cannot alwaysbe made (buyers might simplydrop an offer because they do notreach an agreement on the price,for example), the public debatearound the buyer’s nationality cansignificantly affect the processand can lead to delays, additionalcosts or specific commitments tobe fulfilled by the parties, reduc-ing the business appeal of apotentially valuable transaction.

However, there is a lack of clarityabout the boundaries of govern-ment intervention in foreigntakeovers. It is unclear what couldbe considered ‘legitimate publicinterests’ by the Commission, andgovernments often succeed ininfluencing the process, even ifthe compatibility of their interven-tion with EUMR is questionable.For example, governments canfrustrate a deal by threatening tointerfere with the merger: compa-nies might be not willing to waitfor the Commission to assesswhether the action of the govern-ment is ‘legitimate’, or to see if theCommission will challenge themember state‘s interferencebefore the European courts2.

This policy brief asks the questionof whether concerns of economic

0

500

1000

1500

2000

2500

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Domestic

EU Cross-Border

Acquirer=Non-EU

Target=Non-EU

Source: Bruegel based on TR One database.

Figure 2: Number of merger deals in the EU, 1990-2013

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are 41 percent bigger thandomestic mergers. Foreign-owned companies make asignificant contribution to theEuropean economy‘s turnover. In2010, foreign-owned companiesaccounted for 40 percent of totalturnover growth in Europebetween 2010 and 2011. Withinthe single market however thereis a high degree of heterogeneityin terms of the presence of foreigncompanies on member states’territory (Table 1).

The main lesson that can bedrawn from the theoretical andempirical literature, however, isthat there is no clear-cut indica-tion that foreign takeovers aresystematically beneficial orharmful to host economies. Fearand enthusiasm before a foreigntakeover can be equally mis-placed and a neutral stance wouldseem the most sensible approachto assessment.

We define ‘economic effects’ aseffects on companies’ perform-ance (measured as productivitylevels), employment and R&Defforts: these, broadly speaking,are the major economic issuesthat are a source of concern whena foreign takeover takes place5.Our brief literature review, below,focuses on these.

Multinational companies: A firstinsight from the literature is thatmultinational enterprises (MNEs)by their very nature tend to be effi-cient and to have a flexibleapproach to employment. Help-man et al (2004) find that MNEsenter foreign markets through FDIinstead of through exportsbecause they have lower marginalcosts of production that can offset

the extra sunk costs needed toset-up foreign affiliates and oper-ate them in a less-knownenvironment. This explains whyforeign subsidiaries tend to bemore productive than companiesthat are only active on domesticmarkets. MNEs are also found totransfer their ‘superior’ productiontechnology and management cul-ture to acquired subsidiaries (seefor instance Bloom and VanReenen, 2010), while no clear-cutevidence for positive spilloversonto competitors in the host econ-omy is found (see Lipsey andSjöholm, 2005, for a survey). A fewpapers find that employment inforeign MNEs can be more volatile,because foreign companies canrespond with greater flexibility tochanges in host countries’ labourmarkets (Meriküll and Rõõm,2014, find that such employmentvolatility might depend on theinstitutional environment in com-panies’ host and home countries).But differences between compa-nies’ performances can be downto the scope of their activity ratherthan their origin: Hakkala et al(2010), for example, found thatmultinational firms have a signifi-cantly more elastic labourdemand in Sweden, but theyfound no difference between for-eign and domestic firms.

Selection of domestic targets:The empirical evidence stronglysupports that companies acquiredby foreigners have higher produc-tivity and innovation levels. But amajority of papers, particularlyrecent ones, indicate that thehigher average productivity ofacquired firms is a result of aselection process and is not nec-essarily down to technologytransfer from parent companies.

In comparison to domesticbuyers, foreign buyers tend to‘cherry pick’ higher productivitynational companies (see, forexample, Griffith et al, 2004, for ananalysis of UK data). A convincingexplanation of cherry picking isprovided by Guadalupe et al(2012) using data from Spanishmanufacturing companies.Guadalupe et al found a comple-mentarity between targets’ initialproductivity and foreign compa-nies’ ability to invest ininnovation. A MNE can bring lowerinnovation costs through easieraccess to capital, or increase the

5. Other sources ofconcern that are notdirectly linked to the

nationality of theacquirer are not

discussed. Forexample: transfer-

pricing may allow anacquirer to allocatetaxable revenue to

different subsidiaries indifferent countries. This

concern is howeverequally valid when a

domestic company isthe target or the

acquirer of a foreigncompany.

Table 1: Turnover of companies withnon-domestic ownership as % ofturnover of domestic firms, 2011

Country Turnover ratioIreland 123%Hungary 113%Slovakia 109%Estonia 88%Czech Rep. 84%Romania 77%Luxembourg 75%Belgium 61%UK 61%Latvia 58%Poland 58%Lithuania 57%Bulgaria 54%Austria 53%Netherlands 53%Sweden 49%Croatia 34%Denmark 33%Slovenia 32%Spain 31%Germany 27%Portugal 27%France 25%Finland 24%Italy 20% Cyprus 12%Source: Bruegel based on FATS/Eurostat.Note: data for Greece and Malta is missing.Turnover ratio is the turnover of companieswith non-domestic ownership over theturnover of domestically-owned companies.

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French manufacturing firms bynon-EU acquirers.

• Effects on employment: Hut-tunen (2007) found thatworkers in Finnish foreign-con-trolled companies experiencehigher wage growth after atakeover; Lehto and Böcker-man (2008) found thatcross-border (and domestic)M&As led to downsizing ofmanufacturing employment inFinland. Bandick and Görg(2010) used a dataset ofSwedish firms and found thatforeign takeovers have no or, ifanything, a positive effect onplants‘ survival chances oremployment growth.

• Effects on R&D expenditure:Guadalupe et al (2012) foundpositive and persistent effectson process innovation becauseof foreign takeovers,particularly when the parentfirm provides access to exportmarkets. Stiebale and Reize(2011) and Stiebale (2013)using German data, foundinstead a reduction of R&Dexpenditure by target firms inhost economies and anincrease in domestic R&D byforeign acquirers in the countryof origin; this would be due torelocation of innovation activi-ties to acquirers’ headquarters.

Generally speaking, it cannot beexcluded that a foreign takeoverwould harm in some way the hosteconomy through the cutting ofjobs or R&D spending. However,such an effect cannot beexcluded also when a domesticmerger takes place. For example,Gugler and Yurtoglu (2004) iden-tified negative effects on labourdemand of M&A deals in Europe,but not in the US. They attribute

such a finding to differences inlabour market regulation: inEurope, mergers might be used tocircumvent stricter labour regula-tion. Cassiman et al (2005) foundthat the impact of a merger onR&D output would mostly dependon how companies’ technologicalcapabilities are related. Whentechnologies are substitutes, theeffect of the deal on R&D outputtends to be negative. But whentechnologies are complementary,the effect on R&D is positive. Theliterature suggests, in otherwords, that factors other than theultimate owner’s nationality arerelevant to predict the effect of amerger on a national economy.

THE COST OF MEMBER STATES’INTERFERENCE

Sophisticated empirical papersbased on companies’ datasetsfrom different European countriesreport inconsistent findings;results appear very much specificto the country, industry and timeof observation. The absence of aclear-cut indication that foreigntakeovers are more dangerous forthe domestic economy suggeststhat member states should notretain any leeway to interfere inthe process when the EuropeanCommission exerts its assess-ment power on cross-bordermergers and the government’sconcern is essentially of an eco-nomic nature. That is becausesuch interference would entailwell-defined costs, in exchangefor uncertain benefits.

The guiding principle followed bythe Commission during its mergerassessments is to protect compe-tition and uphold the interests ofthe consumer. The Commission’s

benefits of innovation throughgreater output. For that reason,the value of an innovative com-pany is greater if purchased by aMNE than if purchased by anotherdomestic company. Similarly,Blonigen et al (2014) reportedevidence that suggests that for-eign buyers tend to acquireFrench companies with strongprior export behaviour and recentproductivity drops (‘cherries forsale’). Targets that established anexport network during a high pro-ductivity period and that are laterunable to serve the network aregood takeover deals. Such a net-work is particularly valuable for aforeign acquirer, because they getaccess to markets they could notaccess before.

Acquired companies’ ex-postperformance: When discountingfor this selection effect (ie takinginto account that foreign-ownedcompanies would be good per-formers regardless of the origin ofthe owner), there are mixedresults in terms of the effect offoreign ownership on companies’productivity, employment andinnovation. Recent empiricalpapers that focused on Europeancountries include:

• Effects on productivity: Griffithet al (2004) found very smallimprovements in labour pro-ductivity and mixed evidenceon investment per employee.Benfratello and Sembenelli(2006) using data on Italianfirms found a positive effectonly if the productivity gapbetween the foreign acquirerand the target is significant.Bertrand and Zitouna (2008)found significant increases inproductivity after takeovers of

approach is consistent with thatof all antitrust authorities in thedeveloped world and is based ona solid economic principle: thatpreserving competition is the bestway to maximise wealth in theeconomy. Here, economic litera-ture provides for much moreclear-cut insights. Correctenforcement of competition ruleshas positive effects on innovationby creating the incentives todeploy new and better productsto beat competitors and gain fairrewards in terms of higher long-term profits (Motta, 2004). If theobjective is to foster a healthydomestic industry, ensuring alevel playing field with companiesfree to compete on an equal foot-ing and no competitor shielded byprotectionist measures is thebest way to pursue it. Competitionincreases managers’ incentivesto perform: if they do not, theylose ground to competitors (VanReenen, 2011). Competition alsoscreens out inefficient compa-nies: only the best survive ifcompetition is not distorted(Disney et al, 2003).

If the antitrust authority makes nomistake clearing a merger, com-petition does not decrease. Amerger that does not reduce com-petition likely creates somevalue. Public institutions mightintervene to alter how that valueis distributed, but should not pre-vent that value from arising. Amerger could create winners andlosers: the enforcement ofantitrust control ensures that win-ners win more than what loserslose. An efficient redistributionmechanism should therefore beconceived so that the value that iscreated is redistributed to thosethat lose out and that should be

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protected in the public interest.An efficient tax system can allowthe transfer of some of the cre-ated value to redundant workersin the form of unemploymentbenefits, for example.

There are further compelling rea-sons why the cost of governmentintervention is high. A first consid-eration is strategic trade effects(see Brander and Spencer, 1985).The more leeway countries havethe greater the risk that penalisedcompanies‘ countries of origin willretaliate by implementing equallyrestrictive measures.

Figure 3 shows that there is a pos-itive correlation between thenumber of deals in which a coun-try is involved as target and thenumber of deals in which thesame country is involved as anacquirer6. Even if the literaturesometimes suggests that foreigncompanies relocate R&D activityto their home country aftertakeovers (Stiebale, 2013), retali-ation by potential target countrieswould reduce the inward flow ofR&D that would arise because ofacquisition of foreign companiesby domestic firms. Converging to

a scenario in which all countriesare less open to foreign acquisi-tions could imply lower net R&Doutcomes for all economies. This‘protectionist spiral’ would funda-mentally undermine theexistence of the single market.

A second consideration is the riskof mistakes by public authorities.National policies might be cap-tured by vested interests and thisissue can become acute in an‘emotional’ context, such as thatsurrounding the takeover of anational company by a foreigninvestor, particularly when jobsand innovation activities are atrisk. Therefore more leeway in theapplication of merger rules mightalso mean, paradoxically, a higherrisk of outcomes against thecountry’s interest. Even an inde-pendent arbitrator might besubject to a domestic bias. Bhat-tacharya et al (2007), forexample, identified a lower proba-bility of adverse US courtjudgements for US domestic com-panies compared to foreigncompanies for a number of popu-lar violations such as antitrust,breach of contract, employment-related, patent infringement and

6. In Figure 3, countriesabove the 45° red line

are world net acquirers(that is, their compa-nies have more often

bought a foreign com-pany than have been

bought by a foreigner),while countries below

the red line are net tar-gets. France has the

highest active balanceof deals (this is not

apparent in Figure 3because a log-scale has

been used to make thegraphical illustation

neater).

ATBE

BGHR

CY

CZ

DKFI

FR

DE

GR

HU

IT

LV

LT

LU

MT

NL

PLPT

IE

RO

SKSI

ES

SE

UK

1

10

100

1000

1 10 100 1000

Num

ber o

f dea

ls a

s ac

quire

r

Number of deals as target

EE

Source: Bruegel based on TR One database.

Figure 3: Cross-border world M&A deals (log scale), 1990-2014

product liability. It would alsoseem difficult to draw a line thatwould confine public intervention.If, for example, the objective ofthe government is to preservejobs in the R&D sector, presum-ably there would be no need touse merger control to interveneand force a company to keepthose jobs. Although arguablymotivated by good intentions, thediscussion around ‘public inter-est’ in merger control can drifttowards state interventionism7.

A third consideration is uncer-tainty. More leeway for memberstates would make it more diffi-cult for foreign investors topredict the outcome of theiracquisition plans. It could alsogive rise to multiple outcomes inEurope, since different countriescould in principle impose differ-ent conditions on mergingcompanies. This would reduceincentives to invest in Europe.Hence, if the aim is to enhancedomestic production, attract newbusiness to create jobs andimport innovative activities,adding special scrutiny layers forforeign takeovers would likelyachieve the opposite outcome.Julio and Yook (2013) investi-gated the relationship betweencross-border capital flows andpolitical uncertainty in hosteconomies. They found that thecapital flow from US companiestowards their foreign affiliatesdrops by 12 percent during elec-tion years in host economies.Investment is lower wheninvestors find it more difficult toanticipate future governmentpolicy; the potential for nationalmeasures that might limit busi-ness strategy makes that jobeven trickier.

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THE NEED FOR A CLEARERINSTITUTIONAL FRAMEWORK

According to Article 21(4) of theEUMR, public security, plurality ofmedia and prudential rules areconsidered by default legitimateinterests that a national govern-ment can protect through directintervention. But “any other publicinterest [...] shall be recognisedby the Commission [only] after anassessment of its compatibilitywith the general principles andother provision of Communitylaw”. However, there is currentlyno clarity about how such anassessment would be made.There is no public set of criteriasystematically used by the Com-mission to assess the legitimacyof a claimed public interest inmerger control. This is a fertile ter-ritory for inter-institutionalconflict. Governments mightsometimes attempt to circumventthe EUMR by widening the scopeof the definition of ‘strategic sec-tors’, thereby making it easier forgovernment to justify interven-tion. But currently the Commissionintervenes only when a govern-ment takes a formal decisionspecific to the merger case. Itwould not intervene to challenge ageneral law or decree. This is thecase, for example, with the decreeadopted by the French govern-ment on 15 May 2014 in anattempt to impose conditions onGeneral Electric‘s takeover ofAlstom. The decree was labelledthe ‘French nuclear weaponagainst foreign takeovers’8, but theEuropean Commission did notstart any formal proceedingagainst it because it was not actu-ally enforced. In fact, governmentsmight simply adopt laws thatcould empower the government to

impose conditions potentiallyfalling foul of Article 21(4) EUMRbecause most of the time they willnot implement them: companiesmight be willing to negotiate andaccept conditions because theycannot wait to see the end of ajudicial process through which theCommission challenges a govern-ment before the European courts9.This also explains why Article21(4) EUMR infringement casesare rare (no more than eight in thelast 25 years). Moreover, even ifthe Commission intervenes, thereis a high degree of uncertaintyabout the final outcome of courtproceedings.

The Commission should thereforeplay a more proactive role toreduce uncertainty in significantcross border merger deals and toeffectively constrain govern-ments’ ability to influence theprocess when this can be poten-tially harmful. The Commissionshould draft and propose ad-hocguidelines for the assessment ofArticle 21 EUMR cases. It shouldspecify the criteria under whichgovernment intervention wouldbe allowed in exceptional circum-stances. It should clearly definethe boundaries of public security,plurality of the media and pruden-tial rules and specify theconditions for identifying otherlegitimate strategic interests thata government would be allowed toprotect. It should be emphasisedthat economic concerns cannever be a legitimate reason forintervention. Such guidelinesshould be drafted through anopen process; contributions fromstakeholders should be sought inthe usual fashion in order to becertain that the Commission isgiven the tools needed for the

7. See, for example,Martin Wolf (2014)

‘AstraZeneca is morethan investors’ call’,

Financial Times, 8 May.Wolf asks “who ought tocontrol the fate of com-

panies. Should this beup to shareholders

alone or do other inter-ests matter?” in the

wake of thePfizer/AstraZeneca

attempted deal.

8. Hugh Carnegy,Michael Stothard and

Elizabeth Rigby (2014)‘French ‘nuclear

weapon‘ against foreigntakeovers sparks UK

blast‘, Financial Times,15 May.

9. A good example isE.ON/Endesa – see

footnote 2.

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proper assessment of potentialnational strategic issues. Guide-lines would have a twofoldpurpose: they would help govern-ments to anticipate theCommission’s approach and con-verge on consistent approaches

Aleksander Rutkowski, NicolasVéron and Guntram Wolff for help-ful comments. Excellent researchassistance by Sergiy Golovin,Francesco Salemi and Elena Zau-rino is gratefully acknowledged.

in Europe; and they would reduceuncertainty for foreign investors,hence making potentially welfare-enhancing deals more likely.

The author wishes to thankStephen Gardner, Damien Neven,

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