Delay warning on business mergers

The merger of BoS with Halifax transformed the business scene

Scottish businesses are braced for a legal judgement which could create a new hurdle to company mergers.

A case being considered by the English Court of Appeal could result in many more deals going to an independent tribunal.

Mergers involving Scottish companies could be caught in the process, adding further delays of at least 24 weeks.

Legal advisers Maclay Murray and Spens have warned that such a ruling would increase the burden on businesses.

Mergers and acquisitions have made a significant contribution to the strength of businesses in Scotland.

Court ruling

The merger of Bank of Scotland and Halifax, for example, transformed the business landscape by creating another Scottish-headquartered bank large enough to compete with the Royal Bank of Scotland.

Across the UK, the merger of Carlton and Granada created a new force in commercial broadcasting, ITV plc.

But a ruling in the Court of Appeal, expected next week, could make the process of bringing companies together slower and more expensive.

Commercial broadcasting in the UK has seen a wave of mergers

The court is looking at the proposed merger of iSOFT Group and Torex.

The outcome could have a dramatic impact well beyond the supply of IT systems to the health service - the business of both these companies.

It could force many more merger proposals to be referred to the Competition Commission.

Even deals involving relatively small businesses in Scotland could find themselves caught in the net.

Longer delays

Michael Dean, European and competition law partner with Maclay Murray and Spens, said: "If the Office of Fair Trading is compelled to refer mergers to the Competition Commission, it will have a significant impact on companies of all sizes - even smaller local businesses - which are looking to merge.

"A highly distinctive example of this was when the House of Fraser sold Wylie and Lochead Funeral Parlours to the Co-Op."

What troubled the Monopolies and Mergers Commission was not the overall scale of the acquisition but the impact on particular towns and cities in Scotland.

It had been hoped that the introduction of the Enterprise Act would allow such transactions to go through quickly, but the outcome of the court action could lead to further delays.

Mr Dean said: "As well as taking longer to complete deals, the increased cost for those caught in this process could be hefty."