OVERVIEW
On 8 April 2025, the General Authority for Competition (GAC) in Saudi Arabia released the 5th edition of its Economic Concentration Review Guidelines (the "Guidelines"), marking a significant shift in the Kingdom's merger control framework. Following a public consultation on the July 2024 draft, the updated Guidelines bring much-needed clarity and refinement, aligning more closely with international standards and introducing pragmatic reforms.
As a foundational principle, any act that results in the total or partial transfer of ownership of assets, rights, equity, shares, or obligations of an undertaking to another, or the merging of two or more administrations into a joint administration, qualifies as "Economic Concentration".
In the updated Guidelines, the term "Economic Concentration Parties" refers to firms that are currently engaged in, or planning to engage in, an economic concentration transaction, regardless of whether they have formally applied for approval to complete the process.
KEY CHANGES YOU NEED TO KNOW
1. Tailored Notification Thresholds
Under Saudi Arabia's revised Economic Concentration Review Guidelines, understanding the notification triggers is crucial for businesses operating in the Kingdom. The GAC has established specific thresholds that determine when companies must notify the authority of their transactions. These notification thresholds are based on global annual sales and the target company's sales within Saudi Arabia.
Generally, entities intending to engage in any Economic Concentration transaction must notify the GAC at least (90) days before the transaction's completion if the following conditions are met:
- The total worldwide annual sales value of all Economic Concentration Parties exceeds 200 million Saudi Riyals;
- the total worldwide annual sales value of the target company exceeds 40 million Saudi Riyals; and,
- the total annual sales value in the Kingdom of all Economic Concentration Parties exceeds 40 million Saudi Riyals.
The Guidelines now set separate revenue thresholds for acquisitions, mergers, and joint ventures, addressing a longstanding concern that global transactions with minimal local impact were still subject to notification in KSA.
- Only the acquirer's and target's revenues are considered in acquisitions.
- For acquisitions to be notifiable, the target company's annual sales must exceed 40 million SAR.
- Mergers and joint ventures must meet the thresholds for at least two parties, avoiding unnecessary notifications for transactions involving a minor player.
For acquisitions, all three thresholds must still be met, but now only include the acquirer and target.
For mergers and joint ventures, thresholds must be met by at least two parties, and only those forming the new entity are considered.
One of the key points to consider is how the GAC defines "participating" entities in a concentration. This includes all parties that will be part of the newly formed entity after the transaction is completed. Here's a brief overview of what this means in different scenarios:
- In mergers involving two or more entities, all parties involved in the merging process are recognized as relevant entities.
- When one company acquires another, the acquiring entity and the entity being acquired are both relevant, while the seller is not included.
- If a company acquires a specific part of another company's operations, such as a subsidiary, the relevant entities are the acquiring entity and the operations or division being purchased, but not the seller.
With these guidelines in place, navigating the complexities of economic concentration can be challenging. The implications for compliance are significant, and understanding the details is essential for any business considering mergers or acquisitions in Saudi Arabia.
2. Clarified Definition of "Control"
The latest Guidelines provide a detailed framework for understanding what constitutes control in a merger or acquisition context. These Guidelines recognize both legal and de facto forms of influence, offering a comprehensive definition of control as the ability to exert decisive influence, whether positively or negatively.
A change of control is identified in specific scenarios, including:
- When an entity that previously lacked control acquires it.
- When a party with negative control transitions to obtaining positive control.
These clarifications are pivotal for businesses as they navigate the complexities of economic concentration. The guidelines emphasize that certain minority protections do not equate to actual control, thus ensuring a more precise understanding of these concepts.
3. New Exemptions to Notification
To ease regulatory burdens, the Guidelines introduce exemptions for:
- Joint ventures in new markets/products (particularly cross-border initiatives with no current local competition).
- Passive investment acquisitions made for portfolio diversification, with no intent to control operations.
These exemptions reflect the GAC's more pragmatic stance and support foreign investment and innovation.
4. Approval Validity Period Introduced
GAC clearance decisions are now valid for one year, with extensions available on request. Transactions not completed within this period will require re-application.
PRACTICAL INSIGHTS
These changes bring Saudi Arabia's regime more in line with international standards and global practices. For clients engaging in cross-border M&A, this update:
- Reduces the risk of unnecessary filings for low-impact or foreign-focused deals.
- Offers greater clarity on when and how to notify.
- Still leaves room for improvement, particularly regarding:
-
- A de minimis threshold for local turnover.
- High filing fees, currently capped at SAR 250,000.
- Lack of formal timelines for preliminary reviews or short-form filings.
WHAT SHOULD CLIENTS DO NOW?
- Review transaction structures carefully in light of the new thresholds.
- Assess whether your deal may now qualify for exemption.
- Prepare for the one-year clearance window when planning deal timelines.
- Continue monitoring for further updates or practical guidance from the GAC.
NEED HELP NAVIGATING THE NEW RULES?
As these regulations evolve, it's crucial for businesses to be fully informed about the implications of control and how it affects their operations. Our experienced Competition and M&A specialists are here to support you in interpreting these guidelines and ensuring compliance, setting your business up for success in the ever-changing landscape of the merger and acquisition regime in Saudi Arabia.
Contact us today for tailored advice or to assess whether your next transaction may be impacted.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
