Regus Agrees to £1.5 Billion Merger Deal with Avanta, CMA Review Underway

The serviced office provider Regus has reached an agreement to merge with Avanta Serviced Office Group plc in a deal valued at approximately £1.5 billion. The Competition and Markets Authority (CMA) is currently reviewing the proposed merger, which could impact the serviced office market in several key London areas.

Key Takeaways

• Regus and Avanta, both significant players in the serviced office market, are set to merge.
• The Competition and Markets Authority (CMA) is investigating the merger due to potential competition concerns.
• Regus has offered remedies, including selling certain Avanta centers, to address the CMA's concerns.

Merger Details and Regulatory Scrutiny

The proposed merger between Regus and Avanta Serviced Office Group plc is undergoing a detailed review by the Competition and Markets Authority (CMA). The CMA had previously indicated that an in-depth investigation would be necessary unless Regus provided acceptable undertakings to mitigate competition concerns. Both companies operate in the serviced office space sector, offering ready-to-use, managed office solutions for businesses.

Competition Concerns Addressed

The CMA identified potential issues arising from the merger, specifically concerning the serviced office market in central London. Areas of concern include Hammersmith, Victoria, Canary Wharf/Docklands, Euston/King’s Cross, and Paddington. The authority warned that the acquisition could lead to increased prices, reduced choice, and a decline in the quality of serviced office spaces for customers in these locations.

Regus's Proposed Remedies

In response to the CMA's concerns, Regus has put forward a series of undertakings. The primary proposal involves the sale of Avanta's serviced office centers located in the identified areas of concern to a suitable third-party buyer or buyers. Additionally, Regus has offered a behavioral undertaking related to the Hammersmith center. This undertaking would limit Regus's ability to increase prices or decrease quality at that specific location, particularly if Avanta's lease is terminated early and a buyer cannot be found for the center.

CMA's Next Steps

The CMA has determined that there are reasonable grounds to believe that the proposed undertakings, or a modified version thereof, could be accepted, potentially averting a full phase 2 investigation. The authority has set a deadline of February 1, 2016, to decide whether to accept these undertakings. The CMA will also conduct a public consultation to assess the sufficiency of the proposed remedies in addressing the competition concerns. Should the undertakings not be accepted, the acquisition will proceed to a phase 2 merger investigation.

Sources

• Client Challenge, Financial Times.
• CMA looks in detail at office space merger remedy, GOV.UK.