Turkey: Acquisition Of Pharma Companies: Do You Need To Secure The Turkish Competition Board's Approval?

Introduction

Acquisitions involving technology undertakings have been on the radar of the Turkish Competition Authority following changes in 2022 to merger control rules in Turkey. Indeed, with the change in the legislation, the acquisition of technology undertakings is subject to a simplified turnover threshold (“Exemption”).

Given that the term “technology undertakings” is used in the legislation, one may think that the Exemption solely covers software-related companies. This is not true. Although to date the majority of notifications that have been submitted under the Exemption relates to software and electronic/digital services, the Exemption covers several other industries and sectors, including pharmacology, biotechnology, agrochemicals and healthcare technologies. Therefore, acquisitions of pharma companies may also be notifiable under the Exemption, as demonstrated by a recent decision of the Turkish Competition Board (“Board”).

In this article we discuss (i) to which sectors and to whom the Exemption applies, and (ii) whether undertakings need to have a significant customer base or be active in the exempted sectors in Turkey, with reference to recent Board decisions where the Exemption was applied to the acquisition of pharma companies.

What are the exempted sectors and to whom will they be applied?

Under the Turkish merger control regime, a transaction is notifiable if it results in a change of control on a lasting basis, and if one of the alternative turnover thresholds set out under Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board is triggered. However, with the enactment of the Exemption, if the target entity is active in at least one of the exempted sectors and (i) operates in the Turkish geographical market or (ii) conducts research and development activities in the Turkish geographical market or (iii) provides services to customers in Turkey, the transaction will be notifiable, provided that the acquirer's turnover satisfies the relevant threshold. The target's turnover only plays a limited role on the notification and approval requirements if it operates in one of the exempted sectors.

The full list of the exempted sectors is set out below:

• digital platforms
• software and gaming software
• financial technologies
• biotechnology
• pharmacology
• agricultural chemicals
• healthcare technologies

A recent pharma merger where the Exemption was applied

In a recently published decision, the Board reviewed the acquisition of Amryt Pharma Plc (“Amryt”) by Chiesi Farmaceutici S.p.A.¹ The Board commented that Amryt, the target of the transaction, is a global biopharmaceutical company focused on developing and commercialising new and innovative treatments to enhance the life of patients with rare diseases, with a portfolio of four licensed medicine and R&D programs. In relation to Amryt's activities in Turkey, the Board stated that it only generates turnover from one of its licenced medicines in Turkey. 

In light of the above, the Board held that Amryt is a technology undertaking active in the pharmacology and healthcare technologies sectors, and thus the transaction falls within the scope of the Exemption.

The Board's past practice where it applied the Exemption on transactions concerning pharma companies

The acquisition of joint control of Covetrus Inc. (“Covetrus”), ultimately by Clayton Dubilier & Rice LLC and TPG Inc., was the first transaction in which the Board considered the Exemption for pharmacology companies.² In its decision, the Board stressed that Covetrus does not have any local presence in Turkey and that its activities were limited to import sales. On this basis, the Board concluded that the turnover thresholds were not satisfied for the transaction to require a merger control approval in Turkey. However, it is noted that Covetrus provides animal health technology and services worldwide to veterinarians and animal health practitioners, as well as those who support the pet, equine and large animal veterinary fields, and also operates in the wholesale of animal health consumables, including its own brand products. In this respect, the Board concluded that Covetrus qualifies as a technology undertaking operating in “pharmacology” and “healthcare technology” sectors. To that end, the Board reviewed the proposed transaction and granted approval, as no competitive concerns were identified.

The second decision on pharma companies where the Board considered the transaction within the scope of the Exemption concerns the acquisition of sole control of Pharmalex Holding GmbH (“PharmaLex”) by AmerisourceBergen Corporation.³ PharmaLex is a global provider of technology-enabled, functional services for clients in the highly regulated pharmaceutical, biotechnology and medical device industries, specifically providing strategic consulting and regulatory support to biopharma companies throughout a product's lifecycle. PharmaLex is engaged in the provision of outsource pharmaceutical consultancy services to manufacturers operating in the field of life sciences. Notably, PharmaLex's activities in Turkey are extremely limited. The services provided include pharmacovigilance project management, pharmacovigilance system installation, preparation of the system master file, maintenance works and pharmacovigilance audits. When assessing the notification regarding the contemplated transaction, the Board, by considering PharmaLex's activities, held it as a technology undertaking operating in the “pharmacology” sector. Thus, it claimed jurisdiction over the transaction and unconditionally approved it.

Another decision of the Board relating to pharma companies relates to Werfen S.A.'s envisaged acquisition of sole control of IDV Holdings, Inc. (“Immucor”). Immucor provides (i) serology-based reagents, equipment and molecular products to ensure patient-donor compatibility and provide accurate pre-transfusion testing results, and (ii) to determine appropriate routes for organ or bone marrow transplantation and provide monitoring products for possible post-transplantation organ/tissue incompatibility. Based on the foregoing information, the Board resolved that Immucor qualifies as a technology undertaking operating in “pharmacology” and/or “healthcare technology” fields.

No significant customer base or being active in the exempted sectors in Turkey is necessary

When considering whether it has jurisdiction to review a transaction involving the acquisition of control of a “technology undertaking”, the Board does not require the target to have a significant customer base in the exempted sector. For example, in Cinven Capital Management,⁴ the target, which had only 230 registered customers, was deemed sufficient for the application of the Exemption. Similarly, and as noted above, in PharmaLex/Americasource, where the Board applied the Exemption, it remarked that the target's presence in Turkey was quite limited. 

The Board is willing to claim jurisdiction over transactions where the target is not active in one of the exempted sectors in Turkey. In Berkshire,⁵ although the target was solely active in the exempted sectors abroad, the Board claimed jurisdiction by stating that the target generates turnover from the Turkish market. It being not active in an exempted sector in Turkey was not relevant.

Applicable thresholds

The standard applicable turnover thresholds as of October 2023 are listed below:

Conclusion

The term “technology undertakings” in Turkish merger control legislation includes not only undertakings relating to digital sectors but undertakings active in biotechnology, pharmacology, agricultural chemicals, and healthcare technologies as well. As demonstrated by recent Board decisions, to fall within the scope of the Exemption, technology undertakings do not need to have a wide customer base in Turkey. Similarly, the fact that the relevant target undertaking does not generate Turkish turnover through activities in exempted sectors also does not carry weight in the assessment, provided that the company services customers in Turkey and carries out activities in one of the exempted sectors anywhere in the world.

Footnotes

1. The Board's Chiesi/Amryt decision, dated 16.03.2023 and numbered 23-14/240-78.

2. The Board's Covetrus decision, dated 07.07.2022 and numbered 22-32/512-209.

3. The Board's PharmaLex/AmerisourceBergen decision, dated 23.11.2022 and numbered 22-52/775-319.

4. The Board's Cinven Capital Management decision, dated 18.05.2022 and numbered 22-23/372-157.

5. The Board's Berkshire decision, dated 15.09.2022 and numbered 22-42/625-261.

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.

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.