CMA gives final approval for Tullet Prebon’s acquisition of ICAP’s global broking business

The CMA has accepted undertakings from Tullett Prebon to sell ICAP’s London-based oil desks. These remedies resolve the CMA’s competition concerns and the transaction to create a £1.5bn global broking business is now allowed to proceed.

CRA advised ICAP and Tullett Prebon on Tullet’s acquisition of ICAPs voice and hybrid broking and information businesses. CRA advised on the transaction globally with clearances obtained in the UK, US, Australia and Singapore. The deal was viewed by the CMA and the other authorities as a merger of two of the largest voice and hybrid broking operators, and a 4 to 3 merger with resulting high market shares in many of the segments in which they operated.

CRA developed evidence that showed that even though there were high segment shares, with 11 out of the 20 segments identified having higher than 40% and some as high as 70%-80%, the acquisition was unlikely to harm competition in all but one segment. The evidence we assembled showed that voice broking faced substantial ‘out of market’ constraints from electronic broking and exchange based trading – with many voice segments such as Spot FX and Government Bonds having lost significant volumes to electronic broking and exchanges over recent years. With the introduction of MFID II this trend was expected to further increase across many the segments. Whilst the CMA was concerned that some customers would always have a preference for voice brokerage rather than electronic brokerage, CRA provided evidence that customers exercised significant buyer power, with the largest accounting for a substantial share of the Parties’ volumes across all segments.

The CMA’s Phase 1 Decision, published on the 7th of July, reached the conclusion that, on the basis of evidence of significant buyer power and increasing constraints from electronic broking and exchange trading, the merger would not result in an increase in brokerage fees in 19 out of the 20 overlapping segments. In the remaining Oil segment the CMA announced on the 8th September that it was satisfied with the undertakings and that an in-depth phase two investigation would be avoided.