This presentation by Anna TZANAKI, Lecturer in Law, University of Leeds, was made during the discussion “Serial Acquisitions and Industry Roll-ups” held at the 141st meeting of the OECD Competition Committee on 6 December 2023. More papers and presentations on the topic can be found out at oe.cd/sair. This presentation was uploaded with the author’s consent.

1. Serial Acquisitions and Industry Roll-ups
Anna Tzanaki, Lecturer in Law (University of Leeds)
OECD, Paris, 6 December 2023
School of Law

2. School of Law
Serial Acquisitions – The phenomenon
• An umbrella term to describe different scenarios with similar characteristics
 Private equity & industry rollups
 Digital platforms & ecosystems
• Theoretical intersections
 Antitrust vs finance/ innovation
 Product market competition vs market for corporate control
• Competition law & policy
 Series of small but potentially harmful transactions
 Jurisdictional criteria & substantive assessment

3. School of Law
Serial Acquisitions – Strategies
• Private equity
 Leveraged buyouts (firm specific, carve outs/ divestitures)
 ‘Buy-and-build’ (industry specific, add ons & consolidation)
• Digital platforms
 ‘Killer’ acquisitions (horizontal overlaps, potential competitors)
 Ecosystem expansion (conglomerate mergers, platf. envelopment)
• Rationales
 Corporate/ managerial efficiency
 Ecosystem competition & innovation
 Market power, profit motive vs competition/ consumer harm

4. School of Law
Serial Acquisitions – Determinants
• Economic determinants
 Product market competition/ market power (market efficiency)
 Corporate & managerial performance (organisational efficiency)
• Institutional determinants
 Capital markets, market for corporate control
 Corporate ownership & control structures
 Innovation, start-up & VC ecosystem
• Legal determinants
 Competition law, antitrust & merger control
 Corporate law, fiduciary duties

5. School of Law
Serial Acquisitions – Industries
• Markets prone to exercise of market power/ consolidation
 Inelastic demand/ labour supply, regulated markets with weak price
competition, with geographic/ regulatory entry barriers
 Local markets at early stage of consolidation, with stable revenues
• Markets favourable to corporate control contests
 For corporate bidders: riskier industries with significant economies
of scale, growth opportunities requiring large infusions of equity
(comparative advantage public equity: risk bearing, synergies)
 For PE firms: industries with relatively stable cash flows, limited
growth opportunities, modest capital-raising requirements
(comparative advantage private equity: governance, incentives)
• But ‘convergence’ btw public + PE practices: PE more ‘strategic’, under
CO corporate buyers less synergies vs PE more organisational efficiency

6. School of Law
Competition Law – Comparative Analysis
• EU merger control
 Jurisdiction: ‘controlling’ acquisitions + above turnover thresholds
 Ad hoc review: Art. 22 EUMR referral regardless of thresholds
(+ Art. 14 DMA, reporting obligation for gatekeepers’ mergers)
 Ex post: Art.102 TFEU if no ex ante review (behavioural remedies,
proportionality), Art.101 for minority acqs (prior notice/ approval)
• US merger control
 HSR Act: reporting above size of transaction + persons thresholds
(‘control’ to determine reporting level/ ‘ultimate parent entity’),
‘solely for investment’ exemption (10% threshold) unlikely for PE
 Section 7 Clayton Act: substantive liability regardless of thresholds
 Ex post: Sec.2 Sherman Act, Sec.7 Clayton Act (divestitures)

7. School of Law
Competition Law - Enforcement Gaps
• Below merger control jurisdictional thresholds
 Size of transaction/ parties, change of control?
 Small transactions/ targets
 Acqs by multiple investment vehicles (managed by same PE firm)
 Acqs of non-corporate entities (‘control’ test for reporting, US ≈ EU)
• Challenges for substantive merger assessment
 Merger specific harm/ efficiencies, standalone transactions?
 Cumulative effects of serials acquisitions
 Horizontal overlaps across different funds of PE group (common
ownership, interlocking directorates) hard to track & assess
 Appropriate type & time of remedy

8. School of Law
Competition Law – Recent Developments
• EU merger control
 Legislative reforms of EUMR (thresholds) moot
 Digital Markets Act (sector specific), enhanced transparency
 Case law developments (Illumina, Towercast), ad hoc solutions
• US merger control
 2020 Notice on HSR Act reforms (expanded reporting) expired
o Definition of ‘person’ (common management vs control)
 2023 Notice on HSR Act reforms (+ ad hoc orders), HMG
o Business rationale, past acquisitions over 10 years, serial acqs
 2021 Prior Approval & Notice Policy (case-by-case) rescinded
o Prior approval for any future acquisitions (sales) for 10 years

9. School of Law
Competition Policy – Striking the Right Balance
• Law (competition/ merger law) matters
 Ad hoc solutions vs legal certainty, over-compliance
 Asymmetric reporting vs privileged treatment/ regulatory burden
(private equity, digital gatekeepers)
 Expanded thresholds/ remedies vs distortions in corporate control
market, ‘pro-manager’ antitrust enforcement
 Effect on firm incentives to adopt anti- vs procompetitive strategies
• Competition vs public policy
 Efficiency vs overriding considerations in sensitive sectors (health),
managerial discipline/ cost minimisation vs quality of service
 Harm due to managerial incentives vs change in market structure
 Product market competition vs ease of financing, pace of innovation