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Business Reporter
The Common Markets for Eastern and Southern Africa Competition Commission said the year 2015 saw a record $3,8 trillion investment on mergers and acquisitions being approved. The Commission is the body responsible for enforcing merger control in the Common Market. The framework for merger control is provided under Part 4 of the Comesa Competition Regulations.Commission manager for mergers and acquisitions Willard Mwemba said mergers and acquisitions have become an essential tool for corporate growth in today’s global marketplace.
“This characterized by increasing foreign competition, new technologies, and interdependence of markets. The Regulations usually only apply where there is a cross border impact,” said Mr Mwemba.
He said consumer companies, such as pharmaceuticals and food and beverages commanded the biggest share of the spending at $1 trillion featuring mega deals such as Anheuser-Busch InBev SA’s acquisition of SABMiller Plc for about $107 billion.
Mr Mwemba said financial deals accounted for $751 billion, followed by $447 billion for purchases of industrial companies, including Warren Buffett’s Berkshire Hathaway Inc agreeing to pay more than $30 billion to acquire Precision Castparts Corp.
“The coming together of two firms is without question a significant event on the industrial landscape and the potential resulting restraint on competition has made mergers and acquisitions a key focus of antitrust scrutiny
“Most mergers are fundamentally good for consumers and for the economy as whole – potential benefits include, economies of scale by the acquisition of additional production capacity, expanded or more efficient use of existing facilities by the acquisition of new skills or technologies, costs savings through efficiencies translating into lower prices for consumers or extension of products into new markets,” said Mr Mwemba.
“However, there are instances where firms may seek to acquire their competitors to eliminate competition in the market and obtain market power. To prevent such anticompetitive mergers, most competition authorities have some form of merger review mechanism,” he said.
Mr Mwemba added that a number of high-profile merger transactions were abandoned in 2015-2016 due to Governmental review and antitrust intervention including Comcast’s $67 billion purchase of Time Warner Cable and Halliburton’s $35 billion acquisition of Baker Hughes.
He said the Halliburton/Baker Hughes merger would have involved the second and third largest companies in the oilfield services industry.
Mr Mwemba said parties failed to reach a settlement with the United States Department of Justice in identifying remedies to restore the competition lost with the elimination of Baker Hughes as a standalone company and protect consumers from anti-competitive harm.
Electrolux’s $3,3 billion purchase of General Electric’s appliance business was also turned down.
Mr Mwemba said in July 2015, the US Department of Justice challenged the proposed transactions on the grounds that the merger would substantially lessen competition.
The US Government was primarily concerned with allowing two of the leaders in cooktops and wall ovens to combine creating a duopoly between Electrolux and Whirlpool in that specific market.
The government argued that the industry was already highly concentrated and due to Electrolux’s and General Electric’s individual market power, if they were to merge the new merged company and Whirlpool would control just short of 90 percent major cooking appliance market, causing it to become even more concentrated.
“The successful enforcement of competition laws relies on an appreciation and understanding by consumers, customers, businesses, and governments of the benefits that competitive markets bring. Advocacy is a critical part of the work of competition authorities, particularly for younger agencies,” said Mr Mwemba.
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