CMA Update: Regus and Avanta Merger “prompts concerns”; In-depth Inquiry to Follow

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Today, the Competition and Markets Authority (CMA) announced concerns following the first phase of its investigation into the acquisition of Avanta Serviced Office Group plc by Regus Group Limited.

The CMA has posted an update today, stating:

Regus’ acquisition of Avanta faces an in-depth inquiry unless it can address the CMA’s concerns about competition in serviced offices.

Regus plc and Avanta Serviced Office Group plc both supply serviced office space in central London and Reading. Serviced offices provide centrally-managed, fitted and furnished space for businesses to occupy on a ready-to-go basis. The Competition and Markets Authority found that Regus and Avanta Serviced Office Group plc competed closely in the supply of serviced office space in local areas within central London and Reading.

Following a phase 1 investigation, the CMA found that the merger raised competition concerns in the Hammersmith, Victoria, Canary Wharf/Docklands, Euston/King’s Cross and Paddington areas of central London.

Several customers, competitors and brokers raised concerns that in a number of these local areas there would not be sufficient competition following the merger, potentially leading to higher prices and/or a reduction in choice and quality for customers.

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This merger will be referred for a phase 2 investigation unless Regus offers acceptable undertakings to address the competition concerns arising in these local areas in a clear-cut manner.

Andrea Coscelli, Executive Director, Markets and Mergers, and decision-maker in this case, said:

“Serviced office space provides businesses, including start-ups and small and medium-sized enterprises (SMEs), access to a professional working environment on flexible terms without having to make significant commitments that conventional leaseholds can require. As such, serviced office space, as well as other newly developing office space business models, contribute to the growth of the UK economy. It is therefore important to ensure this marketplace remains competitive.

“Following a phase 1 investigation, we found significant overlaps between the merging parties in several areas of central London. Our investigation found that the merging companies competed closely in these areas and that, following Regus’ acquisition of Avanta, there could be insufficient competition in these areas. This reduction in competition could lead to higher prices or a reduction in choice and quality for customers.

“Regus has the opportunity to avoid a full phase 2 investigation by offering a solution that clearly addresses these concerns and safeguards the interests of customers.”

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