EXECUTIVE SUMMARY
GAC approval has become an unavoidable gateway for most M&A transactions in the Kingdom. Preparing the notification file begins on the day negotiation starts — not the day the agreement is signed. The quality of the initial file determines the number of information requests and the clearance timeline.
Approval from the General Authority for Competition (GAC) has become an unavoidable gateway for most M&A transactions in Saudi Arabia. Delay in this approval can stall a deal for months, and refusal can collapse it entirely. Yet many deal teams begin preparing the GAC file after signing the agreement — a strategic error.
In this article, we examine the practical framework for obtaining GAC approval, from determining when approval is required, to drafting the notification file, to handling requests for additional information.
- When Does a Transaction Require GAC Approval?
Saudi competition law requires prior notification of “Economic Concentration” transactions when specific conditions are met. Economic concentration includes:
▪ Mergers between two or more companies.
▪ Acquisition of control over an existing company — whether by share, asset, or management-rights purchase.
▪ Creation of a Joint Venture that independently manages an economic activity.
Notification is pre-merger if the parties exceed specified thresholds:
▪ Turnover threshold: if the parties’ combined annual turnover exceeds amounts specified in the GAC implementing regulation.
▪ Market share threshold: if the parties’ combined share exceeds a specified percentage in the relevant market.
These thresholds are updated periodically; the current values must be verified at the time of the transaction.
2. Procedures and Phase Durations
Approval procedures pass through two phases:
▪ Phase 1: typically 90 days from file completion. The GAC reviews the transaction and determines whether it warrants fast clearance or requires further scrutiny.
▪ Phase 2: if the GAC opens a deep investigation, the period may extend by another 90 days or more. This phase includes detailed information requests, interviews, and market impact studies.
Practical point: the deal timeline must account for the possibility of moving to Phase 2, particularly in concentrated sectors.
3. Required Documents and How to Prepare Them
The notification file comprises essential elements:
▪ GAC-approved notification form, completed in full.
▪ Detailed description of the transaction, parties, and its legal and financial structure.
▪ Merger / acquisition agreement (the agreed version may be submitted before final signing).
▪ Financial statements of the parties for the past three years.
▪ Analysis of the relevant market and parties’ shares within it.
▪ Analysis of the transaction’s impact on competition.
▪ Any supporting documents for impact assessment (market studies, sector reports).
Practical advice: the quality of the initial file determines the number of RFIs. A weak file may generate 3–5 RFI rounds, each extending the timeline.
4. Defining the “Relevant Market” — The Most Critical Analytical Element
Defining the Relevant Market is the cornerstone of analyzing a transaction’s competition impact. It has two dimensions:
▪ Product Market: identifying the products or services that actually compete with each other, based on substitutability.
▪ Geographic Market: identifying the geographic scope in which competition takes place (local, regional, national, international).
Narrow market definition may show high market shares, raising competition concerns. Broad definition may hide material effects. Balanced drafting requires deep sector understanding and specialized economic analysis.
5. Available Remedies
If the GAC sees that the transaction raises competition concerns, it may not refuse outright but propose remedies addressing these concerns. Types of remedies:
▪ Structural Remedies: such as Divestiture of an asset or business unit to reduce market share.
▪ Behavioral Remedies: such as commitments not to discriminate among customers, maintain existing contracts for a defined period, or grant competitors access to certain infrastructure.
▪ Hybrid Remedies: a combination of both.
Negotiating remedies with the GAC requires legal acumen and market understanding. The optimal position enables the GAC to accept the transaction with the fewest concessions.
Core Takeaway
Preparing the notification file begins on the day negotiation begins — not on the day the agreement is signed. Three steps define success:
▪ Initial relevant market analysis and share assessment before the LOI, to estimate the likelihood of triggering pre-approval.
▪ Drafting the notification file in parallel with negotiation, not after signing.
▪ Building remedy scenarios and their impact on deal structure, to factor into negotiation with the counterparty.
Time is the most critical element — and delays in GAC file preparation may be the leading cause of deal collapse.