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Please note that this briefing is not an exhaustive summary of UK merger control rules. It has been prepared by the NFDA’s external legal advisers, TLT LLP, to highlight some important features of UK merger control to interested businesses, particularly those active in the UK automotive retail sector in light of recent cases.
Recent decisions by the Office of Fair Trading (OFT), now part of the Competition and Markets Authority (CMA), to investigate a wide range of deals in the automotive retail sector, show that the UK competition authority is increasingly focused on dealership M&A activity.
With the exception of major industry deals like Pendragon/Reg Vardy, competition authority intervention has not previously been on most dealers’ radar; instead, dealers’ priority has usually involved getting relevant vehicle manufacturer consents. However, official scrutiny of recent cases, ranging from JCT600/Gilders to Lookers/Shields and Ridgeway/Parkview, is a timely reminder that even for smaller transactions (including those involving the acquisition of a single dealership in financial difficulty), it is vital for merging parties to consider UK merger control rules and procedure.
UK merger control affecting dealership transactions is also likely to become an increasingly important consideration for vehicle manufacturers, as their preferred candidates for dealership acquisitions may have more significant hurdles to overcome in seeking and obtaining official clearance for a wider range of deals. Manufacturers will, in turn, need to support such candidates accordingly, including through the provision of properly considered and timely information on market areas, and the extent of competition in those areas, to the CMA.
Planning for possible competition authority intervention and considering remedies must be part of a considered transaction process. With CMA merger notification fees ranging from £40,000 to £160,000 – usually payable by the acquirer – it is also important to anticipate the cost implications to its existing business.
Advance merger control planning limits potential delays and disruptions and, for those deals that do raise concerns, the prospect of being forced to divest parts of any newly enlarged group (at a possible undervalue) to secure clearance may also be reduced.
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