New merger control compliance rules for the hotel sector
Both hotel buyers and sellers need to be compliant with new merger control regulations as well as allowing sufficient time to clear the regime, according to leading business law firm Mason Hayes & Curran.
A special briefing on Ireland’s hotel sector held by Mason Hayes & Curran today heard that almost a third of the total number of merger notifications to the Competition and Consumer Protection Commission (CCPC) since October 2014 have been related to transactions in the hotel sector. This includes significant transactions such as Dalata’s purchase of Whytes Hotel, the Clayton Hotel and the Pillo Hotel, as well as Lone Star Funds’ purchase of Jury’s.
Changes to legislation require a “merger control filing” to be made by the relevant parties in a transaction if there is a change of control and financial thresholds are met. The financial thresholds are that the combined turnover in the Republic of Ireland of the parties is not less than €50 million and turnover in the Republic of Ireland of each of at least two of the parties is not less than €3 million.
Maureen O’Neill, Partner, EU & Antitrust team, Mason Hayes & Curran said, “We can see from the fact that almost one third of merger notifications since last October relate to hotel purchases that the new regulations are affecting a large amount of the commercial activity in the hotel sector. Even if a deal is only worth six to seven figures, it is the turnover of the companies involved that is of relevance to the new rules on mergers. Experience shows that the new regime is taking 30 days to clear, so all parties will need to ensure that they factor this in to their negotiations to prevent delays.”
“While parties might say ‘it’s an acquisition not a merger’ – in law an acquisition can be considered a merger. Those parties involved shouldn’t forget that there are criminal sanctions for failure to file the relevant documentation of €3,000 on summary conviction or €250,000 on conviction on indictment.”
The briefing also heard forecasts that commercial activity in Ireland’s hotel sector will continue to grow strongly for the remainder of 2015. Already the first quarter has seen record levels of purchasing activity in the sector.
Vanessa Byrne, Partner, Real Estate, Mason Hayes & Curran commented, “The Irish hotel market is out of the distressed phase and in a period of sustained growth. Contrary to widely held belief, purchasing activity is being driven by both US and Irish buyers.”
“The reason for this level of investment all comes down to the fact that it is cheaper to buy hotels than it is to build them. As a result, both funds and investors are seeking value in existing assets rather than developing new projects.”