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ACCA Strategic Professional · Advanced Financial Management · Regulatory framework and processes

In the context of merger control, a competition authority carries out a 'Phase 1' review of a proposed acquisition. Which of the following best describes the main purpose of this initial review?

The initial review screens the merger to decide whether it raises serious competition concerns. If it does, the deal is referred for a detailed second-phase investigation; otherwise it is cleared. It is not concerned with offer price, financing or the target board's recommendation.

  1. ATo decide whether the deal raises serious competition concerns that justify a detailed in-depth investigationCorrect
  2. BTo set the offer price so that target shareholders receive a fair premium
  3. CTo approve the financing arrangements used by the bidder
  4. DTo confirm that the target's directors have recommended the offer

Explanation

A first-phase review is a screening exercise. The authority decides whether the merger could substantially lessen competition and so needs a full investigation, or can be cleared. It does not regulate price, financing or board recommendations, which are matters for takeover rules and the parties.

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