State Aid Recovery and M&A Risk: Navigating Successor Liability in Light of ECJ Case C- 588/23

The judgment of the European Court of Justice in Case C-588/23, delivered on 16 January 2025, represents a notable development in the jurisprudence surrounding the recovery of unlawful State aid. Central to the court’s reasoning is the reaffirmation of the principle that repayment obligations may, under certain conditions, extend beyond the original beneficiary to a successor undertaking. This is particularly relevant where core elements of the business—such as assets, workforce, and operational continuity— have been transferred in substance, even if not in form. This paper situates the ruling within the broader legal framework of economic continuity, examining how the court has built on prior case law, including Germany v. Commission (C-277/00), Groupe Lactalis v. Commission (T-121/15), and Ryanair v. Commission (T-123/09), to clarify the circumstances under which successors may be held liable. By analyzing the factual and legal tests applied—such as the preservation of economic activity, overlap in ownership or control, and transactional context—the study highlights the implications of the judgment for merger structuring, insolvency procedures, and public enforcement of competition rules. The findings underscore the strategic importance of assessing legacy State aid exposure in the context of corporate acquisitions and reorganizations, particularly where distressed assets or privatizations are involved. This paper aims to contribute to a more practical understanding of successor liability and its impact on transactional risk within the internal market.