4:32 pm, November 23, 2020
The Competition and Markets Authority announced today that it had investigated a large scale motor industry merger – but has redacted the details.
Records show that CMA’s initial enforcement order – the first step in the government department’s examination of a deal – was served to the merging companies on September 18.
The authority exists to protect consumers from – as the name suggests – a lack of competition in the marketplace, and can examine mergers and acquisitions that may adversely affect consumer choice.
It has a jurisdiction to investigate when the acquired company’s turnover exceeds £70m in the UK, or the two companies collectively have a 25 per cent (or higher) market share.
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As such, an investigation by the CMA could be seen as the first steps of a large dealer group merger.
ASE Global chairman Mike Jones and compiler of the Car Dealer Top 100 said there are plenty of groups the announcement could relate to.
He said: ‘The UK motor retail sector remains ripe for further consolidation and, whilst the CMA announcement does not name the parties involved, there are plenty of potential candidates.
‘Pendragon and Lookers confirmed that they held initial discussions earlier in the year and this referral could be a hangover from that announcement, or an alternative potential deal.
‘The low valuations of the listed motor retail groups make them attractive targets, however with Brexit looming many businesses will want certainty over the future landscape before embarking on large-scale acquisitions.’
Previous dealer consolidations examined by the CMA include the Pendragon / Reg Vardy merger in 2006, and Steven Eagell’s purchase of nine ex-Lancaster dealers in 2017.
Both of these were classified as ‘motor industry’.
There’s no obligation for businesses to inform the authority of any potential mergers, but many do so before particularly large deals – giving them a legal certainty that the merger can proceed without later being held up.
In this case, however, less than two months after the initial enforcement order, the potential merger was cancelled – before the CMA could begin investigating fully.
‘The parties to the anticipated acquisition confirmed that they have abandoned the transaction,’ the case reference on the CMA’s website reads.
‘On this basis, the CMA has decided not to make a reference in this case. The abandonment occurred before the parties made any public announcement regarding the transaction.’
The wording of the associated documents would imply the CMA was tipped off rather than notified by the two companies. It uses the phrases it ‘has reasonable grounds for suspecting’ rather than ‘believes that it may be the case’.
One Car Dealer source said: ‘This smells of two listed automotive retail groups coming together. It could be any number of them, and any combination of them.
‘The fact that the information has been redacted is a strong indication that the information is sensitive to the listed dealer groups, and thus market sensitive.’
Car Dealer contacted the Competitions and Markets Authority, who were unable to provide any further details of the case owing to ‘legal reasons’.
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