Fit for merger?

The CM140921-gymA’s long-awaited lengthy merger decision on the Pure Gym/The Gym deal has finally been published, nearly two and a half months after the decision was announced to refer it for Phase 2 investigation.

Although the deal was abandoned soon after the reference decision was made, the decision itself is one of the most interesting decisions of the year.

In terms of some of the issues raised, it reminds me very much of the OFT’s Rank/Gala casinos decision almost exactly two years ago.

It should give plenty of food for thought to merging parties in similar types of business on matters such as:

  • how important national parameters of competition can be, even when services are provided through local outlets
  • the importance of realistically assessing which types of outlet compete most strongly and how – not all gyms are created equal, it appears
  • why 80% customer catchment areas are not always the whole story in thinking about the geographic scope of competition
  • how internal documents need to provide sufficient support to the narrative parties put forward
  • why potential competition between parties (i.e. in opening new outlets near the other party) can be every bit as important as existing overlaps, especially where there is only a small number of national players
  • the role of entry analysis and customer switching analysis when competition is as much about fighting for new customers as it is about retaining existing customers and when tariff structures complicate incentives
  • what can happen when the CMA believes it may not have received all the information that is available
  • why website material can become an important source of evidence that needs to be managed well
  • the importance the CMA can attach to being able to replicate or extend results of analysis that the parties present.

Throughout the decision the CMA makes repeated reference to the commentary on retail mergers, published jointly by the former OFT and CC .

It is well worth reading and fully considering the points made in the commentary if you are contemplating a retail merger (even though I would say that having had a close hand in developing the retail commentary!).

The commentary can be found here and the decision itself is here.

 

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