Ireland has implemented the EU Directive on procedural rules and evaluation criteria for the prudential assessment of acquisitions and increases of holdings in the financial sector with effect from 10 June 2009. The Directive, more commonly known as the “Acquisitions Directive”, is aimed at encouraging cross-border mergers and acquisitions in the financial sector and it seeks to conform the process for approving acquisitions by financial regulators throughout the EU member states.

The Acquisitions Directive applies where:

• the target company is a credit institution, insurance undertaking, reinsurance undertaking, life assurance undertaking, investment firm or UCITS management company; and
• a direct or indirect qualifying holding is being acquired (being 10% or more of the capital or voting rights, or where the holding in question makes it possible to exercise a significant influence over the management of the target company); or
• an increase in such a qualifying holding would cause the proportion of the capital or voting rights to reach or exceed 20%, 33% or 50% or so that the target company would become a subsidiary of the acquirer.

The proposed acquirer must notify the relevant supervisory authority in the target company’s member state. In Ireland, the Financial Regulator is the supervisory authority. Among its obligations are:

• completion of its assessment within 60 working days from the date of acknowledgement (being a date within 2 working days of receipt of a notification. The Financial Regulator has one opportunity to request further information during the assessment period, up to a date not later than the 50th working day);
• informing the proposed acquirer within 2 working days of making its determination if opposed to the acquisition, giving reasons for its decision; and
• if consenting to the proposed acquisition, the supervisory authority may impose a deadline for the completion of the acquisition.

Some of the factors to be considered in making an assessment are:

• the reputation of the proposed acquirer;
• the reputation and experience of the management of the target company, who will direct the target company after the acquisition; and
• the financial soundness of the proposed acquirer.

The Acquisitions Directive affects both domestic and cross border acquisitions and is hoped to facilitate consistent handling of cross border mergers and acquisitions in banking, insurance and asset management sectors.