Acquisition in Context of Antitrust Concerns
See how BCG helped a consumer goods company overcome antitrust concerns in the acquisition of its largest competitor.
Amcongo, a market-leading U.S. consumer goods company, was confronted with increasing competitive pressure in its already low-growth and low-margin business. The client’s main questions concerned how to grow profitably and whether it should consider the acquisition of its largest competitor. If the transaction was pursued, severe investigations by the antitrust agency were expected.
We assisted our client in evaluating potential growth options and provided guidance throughout the entire process, including
defining corporate strategy, recommending to grow through acquisition, based on in-depth industry landscaping and validation of a target list
managing the transaction process, including pre-bid preparation, due diligence, negotiations, and pre-merger support
supporting postmerger integration through a project-management office (PMO)
Because antitrust concerns had been identified as the "make-or-break" issue of the deal, special attention had been placed on the legal and regulatory review. BCG’s support focused primarily on management of the regulatory approval process and the commercial assessment of the transaction’s impact on the competitive landscape, including forecasts of the degree of market concentration and the impact on consumer welfare.
The key result of BCG's support was a well-thought-out communication of the acquisition rationale and its positive impact on all stakeholders. Based on a sound elaboration and extensive communication with the regulators, antitrust concerns could be effectively addressed. The interaction with the regulators included the following major elements:
Anticipation of probable antitrust concerns and the subsequent collection and analyses of relevant data
Derivation of compelling arguments to address the concerns with regard to specific regulatory requirements
Conduction of continued discussion and feedback loops with the agency
The extensive interaction resulted in a fact-based decision by the antitrust agency to close its current investigations and was regarded as the key success factor to overcome the last formal obstacle to the acquisition.
The client's acquisition of its largest competitor was highly appreciated by the capital markets. Relative total shareholder return (TSR)—that is, the client's TSR compared with the relevant peer index—increased from 0.9 to 1.32 within a 24-month period.
According to market analysts, this positive reaction was clearly linked to the effects of the acquisition: