Private equity roll-ups and other add-ons: Planning for scrutiny by UK and European competition authorities

UK Competition and Markets Authority: roll-ups in the cross hairs

The CMA identified roll-up acquisitions as an enforcement priority some time ago, particularly in relation to consumer-facing markets. The CMA’s interest in these types of transactions is part of its broader programme of work on ‘cost of living’ issues, which prioritises action across a range of consumer-facing sectors “to ensure that people can get the best possible choices and prices, and that they are not being harmed by weak competition or unfair sales practices” (see the CMA’s July 2024 update for more details).

In 2022 and 2023 it investigated several acquisitions of dental practices and veterinary practices. Most of these transactions were “called-in” for review after completion by the CMA, and it exercised its jurisdiction expansively in finding that the 25% “share of supply” test was met in small local areas. It identified competition concerns in all of the cases, with the parties having to offer divestment remedies in at least some local areas in order to obtain clearance. 

In May 2024 the CMA doubled down on its concerns in the veterinary sector by launching an investigation into the supply of veterinary services for household pets in the UK under its market investigation powers. These allow the CMA to investigate and take action in relation to markets which are not operating competitively. One of the concerns highlighted at launch was that increasingly concentrated local markets – in part driven by sector consolidation – might be leading to weak competition. The CMA investigation is ongoing at the date of publication of this article with the final report due in November 2025.

Broadening of CMA’s merger jurisdiction: new hybrid test relevant to private equity roll-ups and other add-ons?

The thresholds defining the CMA’s jurisdiction over mergers have been amended by the Digital Markets, Competition and Consumers Act 2024 (the “DMCC Act”), the relevant provisions coming into force on 1 January 2025. Whilst the regime remains one of voluntary notification, the CMA monitors for and regularly calls in transactions which are not notified, but for which it considers there to be merit in a review. In this context, the introduction of a new hybrid test expands the CMA’s jurisdiction – as explained below – and potentially increases the risk and uncertainty of the merger review process in some situations. See our article “Casting a wider digital net: the UK’s expanded mergers jurisdiction under the DMCC Act” for further details.

After the changes to the merger control thresholds, the CMA can now review transactions which meet the following thresholds:

• The target generates UK turnover of £100m, adjusted upwards from the previous threshold of £70m; or 
• The acquirer and target together (i.e. there is an overlap between the activities of the acquirer and the target) account for a share of supply of goods or services in the UK of any market of 25% or more; or 
• A new hybrid test where at least one merging party has an existing share of supply of goods or services in the UK of any market of 33% or more AND turnover of at least £350m and the other party has a UK nexus (incorporated in the UK, carries on activities in the UK and/or supplies goods or services in the UK). 

The new hybrid test is notable because, unlike the 25% share of supply test, it does not require an overlap in the activities of the acquirer and the target in the UK, and can therefore apply to the acquisition of targets which do not meet the combined 25% test (or indeed do not overlap at all with the acquirer’s existing portfolio).

For CMA jurisdiction to apply under the hybrid test, a private equity fund manager would have to have a £350m turnover and a 33% share in any UK market. For the purposes of determining whether a private equity fund manager has a £350m turnover and a 33% share of supply in any UK market, the turnover/share of supply of all portfolio companies controlled by the manager would be aggregated. This means that (theoretically at least) any acquisition by a private equity fund manager would fall within the merger control jurisdiction of the CMA if a fund controlled by the manager owned a majority interest in a portfolio company with a 33% share of supply in any UK market (even if that market is unrelated to the target's activities).

The CMA has informally suggested that the hybrid test will be most applicable to so called “killer acquisitions”, particularly in the tech sector, where companies purchase nascent targets with the aim of securing or removing a potential future competitor. However, the test is not explicitly limited to particular sectors or deal types. 

This new test therefore creates a risk for any private equity acquirer with sufficient turnover in the UK and a potential market share across its entire portfolio (in any industry) that may hit 33%+ but where the relevant acquisition(s) do not meet the other thresholds. This is especially the case in relation to the roll-up of successive businesses operating in the same market or other add-on acquisitions which raise competition issues. It remains to be seen in practice how limited or expansive the CMA’s use of this expanded jurisdiction will be.

Government comments on UK competition policy

In January 2025 the Chair of the CMA resigned with the Government noting that “He recognised it was time for him to move on and make way for somebody who does share the mission and strategic direction this Government is taking”. This was followed on 13 February 2025 by the Government launching its draft “strategic steer” to the CMA, seeking views by 6 March 2025. The backdrop for this is the Government’s growth agenda and seeking to cut regulatory red tape where possible – the steer sets out how the Government expects the CMA to support this “national priority”. In particular, the steer states that the CMA should use its tools “proportionately” and “minimise uncertainty” through “proactive, transparent, timely, predictable and responsive engagement with businesses”.

Whilst it remains to be seen how these developments will play out in coming months, it seems clear that the CMA’s interest in focusing on competition issues affecting customers and consumers in the UK and on consumer-facing sectors and “cost of living” issues will continue, given the Government’s keenness for a focus on ‘markets and harms that particularly impact UK-based consumers and businesses’.

European Union: no call-in powers applicable to sub-threshold private equity roll-ups

Prior to the decision of the European Court of Justice in the Illumina/Grail case in September 2024, the European Commission (the “Commission”) considered that it had the power to review transactions referred to it by Member States under Article 22 of the European Merger Regulation which were below the merger thresholds of the EU Merger Regulation, whether or not the Member State had jurisdiction over the transaction under its own national merger control regime. The case decided that the Commission could only consider transactions under Article 22 where the National Competition Authority of the Member State had jurisdiction. The Illumina/Grail judgment has increased the focus on (and arguably the need for) Member State call-in powers, and although much of the discussion and debate on that case has focused on “killer acquisitions”, particularly in the tech space, call-in powers are also highly relevant to private equity roll-up transactions. 

European Union Member States’ call-in powers: application to private equity roll-ups

National Competition Authorities of EU Member States have a history of concerns about the effect of roll-ups by private equity on their local markets. Even before the decision in Illumina /Grail, many EU Member States had introduced call-in powers for their National Competition Authorities based on varying criteria. See our article “Call in the Merger Cavalry – How new intervention powers are transforming merger control” for further details of the call-in powers of various Member States and an explanation of how the picture is complex and still evolving.

National Competition Authorities of Member States without their own call-in regimes have continued to advocate for the introduction of call-in powers, including to deal with private equity roll-ups. 

In January 2025, the Netherlands Authority for Consumers and Markets (“ACM”) outlined its strategic focus for 2025. It announced new market investigations, including into the market for veterinary practices citing its concerns about private equity roll-ups in the Netherlands creating excessive market power and high prices. The ACM cannot take any direct action in relation to findings from its market studies and has long advocated for a call-in power to deal with private equity roll-ups. At the end of 2024 the Netherlands Minister of Economic Affairs announced an investigation into the Netherlands competition regime which could significantly impact mergers and acquisitions in all sectors, including those involving private equity.

In November 2024, the Finnish Competition and Consumer Authority (“FCCA”) published a study on the consolidation of the pet veterinary services sector in Finland. The study noted that roll-up strategies by two private equity owned veterinary chains had consolidated the market and led to higher prices and reduced competition. The FCCA recommended empowering the FCCA to investigate below threshold smaller transactions so as to align Finland’s regulatory framework with those of many other EU countries. 

What does this mean for private equity deal making? Will policy statements and implementation reality align?

Policy makers in the UK and EU stress that growth and simplification are key objectives. The EU has also stressed innovation, and an approach “allowing companies to scale up in global markets”. All of this should be favourable for deal makers, but it is unclear how this will translate in practice.

Roll-ups (and particularly those in consumer-facing sectors) look like being a continuing target for competition authorities, both in the UK and in the EU. An increasing number of National Competition Authorities in the EU Member States are acquiring sub-merger threshold call-in powers. Further call-in powers for roll-up transactions in the EU are therefore highly likely, irrespective of whether the Commission seeks review of the current EU Merger Regulation thresholds in the medium term.

In any event, it is unlikely that assessing merger control risk in the UK and/or the EU is going to become more straightforward . Early consideration of applicable merger control regimes, and whether and when to engage with relevant competition authorities, will be paramount when private equity fund managers are considering their acquisition strategies.

Authored by Cees Brouwer, Angus Coulter, John Embleton, Simon Grimshaw, Jorg Herwig, John Livesey, Martin Sura