Author Archives: Adrian Payne Consulting

About Adrian Payne Consulting

Specialist in merger analysis

The CMA At 500 – What’s Trending – And What’s Not

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In June the CMA published its 500th merger decision.

There’s little doubt that the profile of UK merger decisions has developed a lot since the CMA began. No surprise there, as a great deal can happen over 9 years.

It seems that many readers (especially advisers) are sympathetic to the first of the somewhat tongue-in-cheek narratives I set out in my previous blog, although with a more measured overarching headline, along the lines that the CMA has become much stricter on mergers.

But what lies below that sort of headline?

What exactly does it mean? And for whom?

And what call to action should it have for merging parties, investors and others?

The reason these questions are important is revealed when one looks below the aggregated statistics that the CMA publishes by using data published in case decisions.

In future blogs I plan to say more on all of this, based on recent research I have been doing looking at the CMA’s first 500 merger cases – ‘The CMA At 500’.

Comparing the first 250 and the second 250 brings out many unexpected similarities and differences.

The ‘stricter enforcement’ narrative, it turns out, is much more nuanced that it might first appear from the headline numbers and applies unevenly across different types of case.

Many companies relying on the simple headline ‘stricter trend’ in thinking about merger control risk will be well wide of the mark. The average is different from the typical.

If interested, do watch out for my blogs on ‘The CMA At 500’ or contact me to find out more about my presentation on the research.

Merging Storytime And Fairytales

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Has the CMA become too tough on mergers?

There’s been an outbreak of commentary on this question in the aftermath of the CMA’s decision to prohibit the Microsoft/Activision merger.

Not only by those with direct skin in the game – but also by those using the controversy to lobby for a different UK approach to mergers, those drumming up business and those wishing to make wider political points.

But, as always, statistics can support competing narratives.

Which of the following stories is most insightful?…….

Story 1

From between 2015 and 2018 the CMA blocked 34% of mergers that were subject to an in-depth investigation.

From 2019 to 2022 – it blocked 58%.

Headline: How about – ‘The CMA is out of control and needs to be reined in’?

Story 2

Comparing the two periods the percentage of investigated mergers that the CMA blocked went up by fewer than four percentage points.

Headline: How about – ‘Move along. Little to see here’?

Story 3

The CMA considered around 4000 merger cases between 2015 and 2022. It prohibited 13 of these. Fewer than one third of one per cent.

Headline: How about – ‘The CMA is very light touch – It needs to be a lot tougher’?

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Each of these narratives uses correct information but presents it very differently.

When reading articles about UK merger trends – especially when written on the back of an individual case outcome – here are three key questions well worth asking:

  1. What’s in the picture? And – often more to the point – what’s not?
  2. Who’s saying it? And what’s their interest?
  3. To what extent does the conclusion put forward actually follow from the statistics presented?

UK Merger Insights: 2023 No.4

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Here’s a selection of some of the best articles I have read recently that are relevant to UK merger control………….

Unsurprisingly – a number of these are about the CMA’s much-discussed decision regarding the Microsoft/Activision deal………..

To date, it’s been rare to come across commentary about this deal that a) accurately describes the CMA process, b) gives a balanced portrayal of the CMA’s decision and c) transparently describes the authors’ involvement with, or interest in, the case. If you know of any – please feel free to comment below.

1. Changes to UK Merger Control

Bill Batchelor and colleagues summarise here the planned forthcoming changes to CMA jurisdictional thresholds and investigation procedures.

2. Setting Out The Stall

Alex Hern presents the logic behind the CMA’s prohibition of the Microsoft/Activision deal. Link here

3. War Of The Words

In this piece, Reece Goodall looks at the war of words that broke out following the CMA’s announcement prohibiting the Microsoft/Activision deal

4. Vive La Difference

Here Jacob Parry examines why the CMA and the EC came to different decisions regarding the Microsoft/Activision merger.

5. A Very Costly CMA Merger Prohibition

Paul Sawers looks at the Meta/Giphy case and how costly a CMA merger prohibition can be. Link here.

The Fall And Rise Of CMA Merger Remedies

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I’ve talked in recent posts (here, here and here) about the noticeable rise in CMA merger remedies, both at Phase 1 and Phase 2.

Here’s the overall picture…..

For most of the CMA’s existence the number investigations each year that conclude with competition problems being dealt with by remedies has been between four and ten.

Since last summer, however, there’s been a noticeable increase beyond the normal range – especially noticeable given that the number of public merger investigations has fallen to record low levels.

The rise in remedies seems strong but the chart helps keep things in perspective.

First, the recent number of remedy outcomes, while striking, is not unprecedented.

And, second, the number of remedies has risen and fallen several times. Short-term ‘trends’ have a habit of disappearing.

Even so, an interesting question is whether we have yet to reach ‘peak remedy’ this time around, especially given the changes to the CMA’s remedy processes that I noted in a previous post.

Other interesting ‘remedy’ topics include

  • how the pattern compares with that for merger prohibitions
  • the extent to which the greater use of remedies deters companies from proceeding with deals that may harm competition or chills transactions that might benefit competition.

Which remedy topics would you, dear reader, like to know more about? Do feel free to leave a comment or to drop me a line.

I’m expecting to say more about merger remedies in future posts. Do feel free to click the ‘follow’ button at the side of the main blog page to subscribe to the blog series.

Notes on the above chart:

For each period of 12 months the graph tracks the number of final merger decisions in that period that have been remedy outcomes. Cases are taken into account in the 12 months in which the final decision for the case is published. A Phase 1 case therefore appears in the series when the full written decision is published, unless it is referred to Phase 2, in which case it appears in the series when the full Phase 2 decision is published or the case is abandoned by the merging parties.

UK Merger Insights: 2023 No.3

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Here’s a selection of some of the best articles I have read recently that are relevant to UK merger control………….

1. Overseas Takeovers

In this article Duncan Lamont looks at whether overseas takeovers are a threat to the future of the UK stockmarket.

2. Spirited Mergers

Here’s an important sector to think about……Peter Francombe looks into the outlook for Scotch Whisky mergers in this article.

3. Private Equity Challenges

Rebecca Ward and colleagues look at the increasing challenges facing private equity investors when it comes to merger control. Here’s the link.

4. Faster CMA Merger Remedies?

In this piece Carlo Sushant Chari and Joel Bamford look at the new Phase 2 merger remedy process.

I also talked about it in this post.

5. Roll up, Roll up

Wahida Ahmed says that the CMA is giving more scrutiny to serial acquisitions, in this article.

6. How Harmful Are Killer Acquisitions?

In this paper Mark Ivaldi and colleagues consider the evidence behind theories about so-called ‘killer acquisitions’

Please click here and here for my previous selections this year.

The Market And Me

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There are a number of CMA market investigations going on at the moment.

These raise many challenges for participating companies. But there’s one that I have found regularly crops up……

It’s all about finding and maintaining the right scope of thinking and analysis.

It’s natural for executives in participating companies to focus on their own organisation.

And correspondingly easy to forget that the investigation is into the market .

The two are clearly related. But they are far from the same.

Commenting on the market can be very different from focusing narrowly on your company’s own position.

Previous cases show that it’s very easy to lose sight of the distinction. And to keep up the concentration needed to maintain it.

To take just one example: It is easy to miss the opportunity to contribute to the CMA’s thinking about remedies to deal with competition failures in the market if you focus on the view that remedies are not relevant to your own situation.

If you are involved in a CMA market investigation big questions to make sure you address early on are therefore:

  • What precisely is our organisation’s role in the market?
  • How similar or different is it from other participants?
  • How best to describe our organisation’s position and role?
  • What opportunities and threats are there from the CMA’s focus on the market (rather than just on our own contribution)?

This Friday only – April 14th – I am giving free briefings for clients and subscribers to my blog on ‘How Best To Navigate A CMA Market Investigation’. Please email me to arrange a time.

The CMA Will Definitely Clear This Merger

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An investor tells me with certainty that, if the high profile deal in which he is interested happens, the CMA will definitely clear it.

“They (the acquirer) wouldn’t go ahead if they weren’t absolutely sure they could get it through”, he insists.

It’s a view that I’ve heard many times during my investor briefings on mergers from supermarkets to video games.

It’s a bold claim.

Which is why – when it crops up – I usually find myself asking briefing participants the following:

What would have to be the case for it to be true?

What would have to be true for this to be the case?

At which point participants to the discussion tend quickly to alight on three big assumptions:

1. That the acquirer has prepared perfectly for all eventualities

2. That none of the eventualities results in any risk whatsoever that the CMA will find competition problems.

3. That this acquirer would only proceed with absolute certainty of outcome.

When that happens discussion often then turns to how frequently these assumptions have held in similar past cases.

Quite a lot is known about that, under all three headings.

And when that is discussed, guess what tends to happen next.

Questions Are Not The Answer

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UK parliamentary hearings often illuminate the skills involved in powerful questioning and in how to respond to questions, powerful or otherwise.

And strong questioning skills incorporate strong listening skills.

You can’t have one without the other.

It’s why I regularly cite parliamentary hearings in my training work for competition agencies, because participants in the training can watch and replay the key interactions to observe the quality of the questions and the quality of the listening.

Yesterday’s interrogation of Boris Johnson by the Privileges Committee was no exception.

In fact it was an exemplar in one area in particular……..

The importance of questioners listening actively to the answer they are being given

and asking a powerful follow-up question that builds on that answer…..

…….and the results when that doesn’t happen!

If you are building skills in this area take a look at a few of the interactions and see what you would have done differently as a questioner:

  • Which parts of the answer could/should have been probed further that were not followed up?
  • What would have been a more powerful follow-up question?

One Of The Above

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Here’s a question that’s worth asking if you’re assessing the prospects for the outcome of a CMA merger investigation:

In recent years which minority type of merger accounted for 100% – yes, 100% – of the marked rise in CMA Phase 1 references to an in-depth Phase 2 investigation?

Was it…

  1. Cases that the CMA selected for investigation (as opposed to cases notified by the parties)?
  2. Cases involving a so-called non-horizontal theory of harm?
  3. Cases that attracted complaints from customers and competitors?
  4. Cases launched by the CMA in the second quarter of the year?
  5. Cases that are anticipated (rather than completed) and that were qualified for investigation under the turnover test?
  6. Cases that involved so-called ‘platform’ businesses?
  7. Cases involving concerns about potential competition (as opposed to the removal of existing competition)?

Which answer would you choose? (Do drop me a line or put your answer in the comments box below)

If there’s sufficient interest I’ll look at the main candidates in future posts.

And, no, it’s not a trick question!

One of the above is the correct answer!….

…..Which in turn means revisiting the simple ‘rising CMA intervention’ narrative that often appears in commentaries.

Dial or No Dial?

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I’ve been very struck over the years by how differently companies prepare for CMA hearings during merger investigations.

Hearings are an important feature in many merger investigations, providing an opportunity for the merging firms, rivals and other interested parties to make their case.

Some hearings are turning points in a case.

Some are wasted opportunities.

Much depends on how hard the organisations involved think (or don’t think) about the objectives they set themselves.

Some prepare to dial up the rhetoric.

Some prepare to move the dial.

So, for all those with CMA hearings in view here’s a key question to start with…..

What are you really preparing for ?