There’s been a lot of attention recently on a flurry of merger transactions that have been abandoned at Phase 2 of the Competition and Market Authority (CMA) merger control process.
Some say that this is because the CMA has got tougher on mergers, especially under the leadership of Andrew Tyrie.
Overall, however, the proportion of investigated transactions that do not proceed – either because they are abandoned by the parties or prohibited by the CMA – has been almost identical under the CMA to the proportion under its predecessor body, the Competition Commission (CC).
However, the CMA allows certain deals to proceed without formal investigation that would once have been reviewed under its predecessor agencies.
If the figures were adjusted to allow like-for-like comparison it is arguable that a lower proportion of deals are abandoned or prohibited following CMA scrutiny than was previously the case.
Nevertheless, it is also the case that the percentage of investigated deals abandoned or prohibited has been at record high levels over the past couple of years, contrasting with very low levels in the CMA’s first four years.
The key question is the extent to which recent figures represent normal annual variation, a sign of tougher CMA policy or a sign that companies have attempted riskier transactions.
My own analysis suggests that the profile of cases has played an important part.
In particular, compared to previous years, there have been notable increases in the percentage of cases involving:
- high shares of supply – and/or
- few remaining competitors – and/or
- close competition between the merging parties.
In 2019, for example, nearly 10% of cases involved all three features – much higher than previously.
At the same time a sharp fall in the proportion of cases involving assets with potential for divestment to solve competition problems fed directly through to:
- more reference cases
- more Phase 2 prohibitions
- more companies deciding to abandon their merger.
Looking ahead, a big question is whether the fall out from the Covid-19 crisis will further embolden firms to undertake deals with significant levels of merger control risk.
What proportion of deals investigated by the CMA has been prohibited or abandoned?Click below on the figure you think is closest to the answer: