UK merger control decisions in 2017 reflect a mixture of:
- the characteristics of the mergers taking place during the year
- the features of those mergers that the CMA chose to investigate
- the way that the CMA assessed and decided the cases.
Each of these can differ to a certain extent from year to year. It is important, therefore, not to over-extrapolate from just one year’s portfolio of cases. It remains to be seen which of 2017’s most noticeable features will continue and which will revert to previous patterns.
Nevertheless, given the number of companies surprised by the CMA’s 2017 Phase 1 decisions, those planning mergers in 2018 may wish to do more to ensure that their preparations take into account the potential for at least some of the 2017 themes to continue.
In this respect I would pick out the following areas to consider, using the five headings that I often use in my training and coaching work to guide more effective merger screening, planning and case-making:
- Take into account a wider range of potential outcomes at all areas of merger screening and planning, especially the potential for remedies in Phase 1 cases that the parties think will be unconditionally cleared.
- Avoid over-reliance on share of supply analysis in screening potential acquisitions and preparing a merger case, especially in situations where the increment to share of supply looks modest.
- Take into account insights from the CMA’s now-considerable track record of cases to help better assess the prospects for a CMA investigation, including when considering whether or not to notify a transaction.
- Give extra attention – and earlier – to how closely the merging parties compete and the range of evidence that can be used to make a better case
- Spend less effort and money on those areas of argument and evidence that continue to carry little weight
- As described in a previous article, cases often involve conflicting evidence. Arguments around ‘closeness of competition’ are a high risk area in this regard, requiring additional attention in order to put forward the best possible case – as seen in several of this year’s cases.
- This also puts a premium on effective planning to ensure the executive and advisory team is able to put forward a shared and consistent narrative, a topic that is easy to neglect within the time pressures of a case.
- Consider the full range of techniques available to assess ‘closeness of competition’ and plan their use well to ensure that data collection is not wasted effort but instead developed to yield valuable insight.
- Make maximum use of surprising competition findings that emerged during the case to build competitive advantage post-merger
- Trust between the merging parties’ team and the CMA is a crucial aspect of how a case is received and how it develops. It becomes even more important in cases where evidence and reasoning is nuanced, as in many cases within this year’s CMA case portfolio.
I shall be talking more about each of these areas, as well as about the many other lessons to be learnt from individual cases within this year’s portfolio, at my customary January ‘Merger A-Z’ briefing events.