Home Business News Nearly 70% of all M&A deals subject to CMA in-depth probes abandoned over the last three years

Nearly 70% of all M&A deals subject to CMA in-depth probes abandoned over the last three years

by LLB Finance Reporter
29th Nov 23 10:28 am

The UK’s leading competition watchdog, the Competition and Markets Authority (CMA), has voiced concerns regarding Adobe’s proposed $20 billion acquisition of Figma, a digital design collaboration platform.

The CMAs preliminary findings suggest that the deal could result in the “elimination of competition,” a “reduction in innovation,” and the removal of Figma as a threat to Adobe‘s flagship products, Photoshop and Illustrator.

While these findings are not yet final, their confirmation could represent a significant setback for the acquisition, which is already under scrutiny by the US Department of Justice and the European Union. In light of this, Claire Trachet, M&A expert and CEO of business advisory, Trachet, discusses the impact of the CMA’s latest judgement and its new powers within the UK’s M&A sector.

Both Adobe and Figma expressed disappointment with the CMA’s findings, with Figma contesting the notion that it competes directly with Adobe, highlighting its position as the strongest player in a dynamic and highly competitive market for product design.

Adobe stated that the proposed acquisition would bring substantial value to customers and expressed its intention to review the provisional findings, engaging further with the CMA on the facts and merits of the case.

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News of the Activision-Microsoft merger earlier this year was positive for the UK’s M&A sector which has seen the number of deals in the UK currently “down 21% year-on-year.”

This is in conjunction with the actions of the CMA whose “reviews or vetoes of deals have led to the abandonment of three times as many transactions when compared with rulings from the EU regulator from 2018 and 2020”. As a result of this, Linklaters reports that the last three years have seen “70% of deals in the UK abandoned or killed.”  The news today, therefore, is an optimistic sign from the CMA for the UK’s M&A sector.

The CMA over the last few years has been under constant scrutiny regarding its decisions, such as earlier this year blocking Ineos – a British multinational chemicals company – from purchasing rival Sika. Ineos Chair, Sir Jim Ratcliffe, at the time, accused the government of being “increasingly hostile to business”. The post-Brexit M&A market has therefore seen the CMA exercise enhanced powers to look at cross-border M&A transactions – experts argue their approach is now hampering economic growth and innovation.

Research from DealRoom reports that increased support into the M&A sector could quadruple its value to $4 trillion, meaning that the decision to block certain deals potentially stifles the UK’s progress and the creation of jobs across the sector.

Therefore, the CMAs potential decision to block the Adobe-Figma deal for example, directly “impacts the attractiveness of the UK as an M&A destination.” The message is then clear, that ‘the European Union is a more attractive place to start a business than the United Kingdom’.

Claire Trachet (CEO/Founder) comments on the deal and what this means for the future of the UK’s M&A market, “Although the CMA have expressed concerns on the proposed Adobe-Figma merger, there have been various events that have taken place which suggest their decision could change in future deliberation.

“With high profile deals already allowed, such as the merger between Microsoft and Activision, it becomes essential for the CMA to carefully consider the outcome that will impact investor confidence and future companies looking to hold deals in the UK.

“The CMA’s main goal in approaching mergers has always been to ensure there is fair competition in growing markets as well as prioritising consumer interests by seeking to ensure a variety of choices and options for consumers.

“This has been seen in various deals such as the $19bn Vodafone-Three merger, which indicates that the CMA is open to approving high-profile deals which drive innovation within the tech sector and still benefit consumers. It’s willingness to engage in a restructured proposal shows that the UK is open to taking a flexible approach with big tech while addressing regulatory concerns.”

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