CMA issues full text decision on acqusition by Shearwell Data of the entire issued share capital of Ketchum Manufacturing Limited
The UK Competition and Markets Authority (“CMA”) published on Friday the full text of its decision to approve the anticipated acquisition by Shearwell Data Limited (“Shearwell Data”) of the entire issued share capital of Ketchum Manufacturing Limited. The decision comes after the CMA announced on 23 January its intention not to refer the merger to a Phase 2 investigation because the merger would not give rise to a realistic prospect of a substantial lessening of competition within a market or markets in the UK.
Julian Maitland-Walker, Senior Partner of Maitland Walker LLP advised Shearwell Data on the acquisition and notification to the CMA assisted by David Hollier, Assistant Solicitor. The CMA’s decision is available here.
The parties overlap in the supply of engraved tags for cattle and sheep with the combined share of supply for each of these markets being increased by increments of 5 – 20% to between 25-50% therefore satisfying the Enterprise Act 2002 share of supply test.
The CMA found that the supply of engraved tags for cattle and sheep each formed distinct product frames of reference and, within each animal segment, the market is further segmented by those tags that are suitable for use as a primary tag (to store information required by UK and EU regulations and DEFRA which must be plastic and non-electronic in relation to cattle and plastic and electronic in relation to sheep) and those tags that are suitable for use as secondary tags (to store additional information about the animal and which are not subject to restrictions on material and form).
The CMA found that the parties were not perceived by customers to be close competitors and that there are a number of alternative suppliers with substantial spare capacity which would constrain the parties post-merger. Switching suppliers is fairly simple for customers in these markets.
Merging two companies can have great benefits in terms of economies of scale, increased sales revenue and market share. However, it is essential for companies proposing to merge to take specialist advice on the structure of the acquisition, the due diligence and the mutual non-disclosure agreements involved as well as the potential competition law aspects of the merger.
For more on mergers and acquisitions and competition law issues please contact Julian Maitland-Walker of our Corporate & Commercial and EU & Competition departments. Julian has experience of a wide range of transactions across a variety of sectors and jurisdictions.