STS/Butler Merger Provisionally Cleared By CC

The Competition Commission ('CC') has provisionally cleared the completed acquisition by Sector Treasury Services Limited ('STS') of Butlers (a trading division of ICAP plc) which provides treasury management advisory ('TMA') services.
UK Antitrust/Competition Law
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The Competition Commission ('CC') has provisionally cleared the completed acquisition by Sector Treasury Services Limited ('STS') of Butlers (a trading division of ICAP plc) which provides treasury management advisory ('TMA') services. 

Prior to the merger, both companies supplied (among other things) TMA services to local authorities in the UK under retainer contracts.  Treasury management is the process by which public and private sector bodies manage their cash flows and associated financial risks. It includes deciding when, for how long and with whom to invest surplus funds and from whom to borrow additional funds and on what terms.

The evidence suggested that if Butlers had not been bought by STS, its owners would have closed it anyway and wound down the existing contracts it held with local authorities.  As a result, the merger does not reduce the number of competing companies in this market.

One concern was whether the immediate transfer of Butlers' contracts to STS through the merger—as opposed to the alternative of them being retendered over a longer period of time—would provide STS with a competitive advantage through its increased ability to retain the contracts when they were retendered. However, whilst acquiring Butlers' contracts through the merger might give STS the chance to exploit customer inertia by attempting to retain these contracts with less attractive bids than it might otherwise have made, any such advantage, and resultant effect on competition, is likely to be small.   As a result, the CC has provisionally decided to clear the merger.

The CC will now consider responses to the provisional findings before publishing its final report, which it must do by no later than 14 September 2011.  The CC has asked for views on the provisional findings report from all interested parties, in writing, by 5 August 2011.

It is notable that this is the third merger this year where the CC has relied on the failing firm scenario to conclude that the merger does not give rise to competition concerns (the other two being Ratcliff Palfinger/ Ross & Bonnyman and Stena AB/DFDS Irish Sea ferry services).

To view Community Week, Issue 530, 22nd July 2011 in full, Click here.

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