Cross-border mergers: getting easier in Europe

After decades of negotiations, the European Union has finally agreed on a new directive aimed at reducing the administrative and legislative obstacles to such mergers. According to the EU Council, which approved the document in September, the new directive will also reduce cross-border operating costs in Europe.

Some EU member states currently do not allow cross-border deals. They have been given a two-year transition period to adapt their national laws and conform to the provisions of the new directive. When the directive has been implemented throughout the EU's 25 member countries, companies will find it much simpler to pursue Europe-wide business strategies. At the moment internationally oriented companies often have to resort to complex arrangements in order to carry out a cross-border merger. These typically involve the creation of holding companies which constitute an extra administrative layer and complicate the task of managing the various operations as an integrated unit.

The new directive, which applies to mergers of limited liability companies, should prove particularly appealing to small and medium-sized companies. It provides a less complicated alternative to the "European Company (SE) Regulation and Directive", which also provides a legal basis for cross-border mergers and is being considered by several larger companies in Europe. Merger-and-acquisition analysts say the new directive will significantly reduce the barriers for companies wanting to buy into the German market.