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The Competition and Markets Authority (CMA) has set out its plans for a streamlined process which could see water mergers approved within 40 days.
The current system sees water mergers automatically referred to a more in-depth (phase 2) investigation, which can take up to six months to complete, but the new regime would see this dramatically shortened.
The proposals from the CMA would see water mergers brought in line with the other M&A cases it deals with, where a phase 1 investigation is conducted first and can lead to straightforward deals being approved promptly.
Ofwat is also given a statutory role for these phase 1 investigations, where it has to state the impact any mergers would have on its ability to carry out its statutory functions – such as setting price controls – and whether this impact would be outweighed by customer benefits.
Where the CMA believes it is the case that a merger has resulted, or may be expected to result, in a substantial lessening of competition, it has a duty to refer it for an in-depth phase 2 investigation, as it does when the turnover of a company involved in the merger is more than £10 million.
Ofwat has signalled increasing openness to mergers among water companies over the past 12 months. Late last year, chairman Jonson Cox called for “dynamic and differentiated” deals as the industry changes shape following PR14, and in anticipation of market opening in 2017.
The consultation closes on 15 October, after which the CMA will finalise its guidance.
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