Increased scrutiny of private equity investment is firmly on the radar of US antitrust enforcers. Both the Federal Trade Commission (FTC) and U.S. Department of Justice's Antitrust Division (DOJ) have expressed concern, through various speeches, interviews and their own cases, over the degree of leverage and market power that private equity firms have, in their view, amassed in certain sections of the US economy.
Here in the UK, the Competition & Markets Authority (CMA) has thus far taken a broadly neutral stance to the ownership of parties involved in its investigations (whether that be a trade buyer, private equity fund or other financial investor). However, recent comments made by the CMA's Chief Executive, Sarah Cardell, at the Spring 2023 Enforcers Summit in Washington D.C. suggest the dial may be shifting. In the M&A space, Cardell made clear that 'roll up' acquisitions (whereby private equity firms buy up, and merge, multiple smaller or independent players in the same industry to benefit from economies of scale and valuations at higher multiples) will, consistent with enforcement priorities in the US, "come in for very close scrutiny" here in the UK.
Cardell's comments are the strongest to date on the CMA's approach to the growth of PE investment in the UK economy. They follow questions posed by a government committee back in July 2021 to the then CMA Chief Executive over whether the CMA had sufficient ability to investigate acquisitions of high street brands by private equity firms.
In this briefing we discuss the metrics used to inform the CMA's approach to private equity investment in recent years. We then consider whether there has in fact been a shift in the competition-law risk profile of PE investment in the UK already, or whether the position has remained business-as-usual so far.