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Interview with Sheldon Mills, CMA (Global Merger Control Conference - Paris, 2 December 2016)

Concurrences Review & Dechert + McKinsey + Advolis

Friday, December 2, 2016 at 8:30 AM - Wednesday, December 2, 2020 at 1:00 PM (CET)

Interview with Sheldon Mills, CMA (Global Merger...

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4th Edition of the Global Merger Control Conference



Interview with Sheldon Mills (CMA)

Sheldon Mills (CMA) has been interviewed by Antoni Vassileff (Advolis) in anticipation of the 4th edition of the Global Merger Control Conference, to be held in Paris the 2 Decembre 2016. They will participate in the panel "Remedies: Can You Disarm the Harm? Divestitures, Up-front Buyers…".

To see the full program, please visit the event website.

What lessons have the CMA’s teams learned from the past implementation of divestiture remedies and how have those lessons impacted the structure of divestiture remedies in subsequent cases?

The CMA has significant expertise in designing and implementing remedies. In relevant cases, our remedies advisors provided specialist analysis as part of our case teams. We are conducting a rolling programme of research into past remedies which feeds into our development of future remedies policy. As part of this programme, we have learned several lessons which apply to divestiture remedies in particular.

First, the final report must be clear about all elements that should be included in the divestiture package. In the acquisition of FSS and Fife Resources by Sibelco, referred to the Competition Commission (CC) in 2001, the divestiture trustee (appointed after the parties failed to sell the divestment business within the agreed timetable) asked if the divestment business’ quarry could be sold for landfill. This would not have remedied the competition issues. The importance of a precisely specified divestment package is especially important where a whole business is not being divested. Interim measures should be designed carefully to ensure that the divestment business is maintained until the divestiture is complete.

Second, a thorough assessment of potential purchasers should be conducted. The CMA needs to balance the parties’ desire for transparency with its need to conduct a detailed assessment and its confidentiality obligations to bidders. Potential purchasers’ financial viability and commitment to the market are particularly important factors to assess; these factors are reflected in the CMA’s guidance on assessing purchasers. It can also be important to consider a range of potential purchasers, especially in the early stages of a remedies process, to maximise the likelihood of finding a suitable purchaser.

Finally, it is important to have a backup plan in case the divestment process encounters difficulties. It is usually appropriate for a backup remedy to be more onerous than the initial remedy, as otherwise it may create incentives for the parties to delay or undermine the implementation of the initial remedy, and as the CMA’s approach in the first instance is to accept the least onerous remedy which is required to address its concerns. The CMA typically includes in its divestment remedies a provision for the sale of the package by divestiture trustees at no minimum price, if the parties are unable to accomplish the sale within a certain timeframe.

In relation to the fate of the divestiture package, would you have any success story to share? Has there been cases where the divestiture package failed to become a viable and competitive force on the market?

The CMA and its predecessors have used major divestiture packages to solve significant competition concerns in a number of mergers. For example, in the joint venture between Anglo American and Lafarge, referred to the CC in 2011, the divestment package constituted a significant portfolio of operations to enable a new entrant of sufficient scale to break into the cement market. Another example would be Ryanair’s acquisition of a stake in Aer Lingus, referred to the CC in 2012, in which the CC required Ryanair to sell its stake down to 5%; the CC’s remedy stood up to scrutiny under appeal.

We have also been able to successfully remedy many cases at phase 1 - last year, 9 of our 62 phase 1 cases involved undertakings in lieu of reference, which allow merging parties to offer early remedies to avoid a more extensive phase 2 investigation. Our cases have often involved substantial divestments; for example in the acquisition by Co-operative Group of Somerfield in 2008, we remedied concerns in over 120 local areas. We also recently secured the divestment of 14 ready-mixed concrete sites in Breedon Aggregates’ acquisition of Hope this year, and 16 pubs in Greene King’s acquisition of Spirit Pub Company in 2015.

Some divestment remedies are more challenging than others, particularly when there are few appropriate purchasers. For example, in Somerfield’s acquisition of 115 stores from Morrison, referred to the CC in 2005, the CC found competition concerns in relation to 12 stores. For most stores the divestment process went smoothly, but in some remote areas suitable purchasers could not be found, even at no minimum price.

What is in your view a good monitoring trustee?

The CMA usually appoints a firm of accountants with a breadth of financial skills and business experience as monitoring trustees. Corporate finance and restructuring skills are typically beneficial. It’s crucial that the monitoring trustee be suited to the specific circumstances of the case – for example, in the merger between Arqiva and the National Grid Wireless Group, referred to the CC in 2007, a monitoring trustee with technical experience was appointed to monitor the parties’ compliance with interim undertakings.

Have questions about Interview with Sheldon Mills, CMA (Global Merger Control Conference - Paris, 2 December 2016)? Contact Concurrences Review & Dechert + McKinsey + Advolis

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Capital 8
32 Rue de Monceau
75008 Paris

Friday, December 2, 2016 at 8:30 AM - Wednesday, December 2, 2020 at 1:00 PM (CET)

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Concurrences Review & Dechert + McKinsey + Advolis

The theme of this fourth annual Global Merger Control conference focuses on the recent proliferation of merger control regulation and enforcers. Such a proliferation leads to the inevitable question of whether, in this new regulatory environment, mergers and acquisitions have been made subject to undue obstacles. Indeed, of more that 200 sovereign states in the world, some 125 now apply merger control rules to transactions meeting thresholds of various intensity.  This event is organized by Concurrences Review, with the support of Dechert, McKinsey & Company and Advolis.

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Interview with Sheldon Mills, CMA (Global Merger Control Conference - Paris, 2 December 2016)
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