What UK scrutiny of the Diebold Nixdorf deal signifies
The U.K. Competition Markets Authority has given Diebold Inc. until this Friday to lay out a plan for ensuring that its acquisition of Wincor Nixdorf will not harm the ATM market in Great Britain.
According to an enforcement order issued by the CMA, the authority is considering "whether the creation of that situation [i.e., the business combination] has resulted or may be expected to result in a substantial lessening of competition in any market or markets in the United Kingdom."
In addition to the order, the CMA issued a press release explaining its actions:
In its initial investigation, the Competition and Markets Authority has found that both parties compete closely in the supply of customer-operated ATMs in the U.K. The CMA has also said that at present there is only one other credible competitor supplying such ATMs in the U.K. (NCR), and there is limited prospect of other companies entering the U.K. market in the near future.
The CMA has therefore found that the merger could lead to a substantial lessening of competition in the supply of customer-operated ATMs in the U.K.
The transaction has been cleared by competition authorities in a number of other countries. However, the CMA considered the impact of the merger in the U.K. and notes that the competitive situation in the U.K. could differ from other countries, for example in relation to the number of providers and the barriers facing other companies trying to enter the market.
Diebold has until 26 August 2016 to offer proposals to resolve the competition concerns identified by the CMA. If Diebold does not offer such undertakings, or if the CMA is unable to accept undertakings offered, the merger will be referred for an in-depth phase 2 investigation.
The Street said in a report that the inquiry could mean "months of uncertainty over the future of the deal." A subhead to the story announced that, "U.S. ATM maker Diebold's $1.9 billion takeover of rival Wincor Nixdorf could be blocked by the British anti-trust watchdog, despite regulatory approvals elsewhere."
However, in an email to ATM Marketplace, a Diebold spokesman clarified that any uncertainty or blocking action would be in respect to the U.K. only, and would have no bearing on other markets served by the companies involved.
The CMA order specifies that, until it reaches a final decision about the combination:
- the Wincor business is carried on separately from the Diebold business and the Wincor business's separate sales or brand identity is maintained;
- the Wincor business and the Diebold business are maintained as a going concern and sufficient resources are made available for the development of the Wincor business and the Diebold business, on the basis of their respective pre-merger business plans;
- except in the ordinary course of business, no substantive changes are made to the organizational structure of, or the management responsibilities within, the Wincor business or the Diebold business; and
- the nature, description, range and quality of goods and services supplied in the U.K. by each of the two businesses are maintained and preserved.
Further, the order specifies that:
... no business secrets, know-how, commercially sensitive information, intellectual property or any other information of a confidential or proprietary nature relating to either of the two businesses shall pass, directly or indirectly, from the Wincor business (or any of its employees, directors, agents or affiliates) to the Diebold business (or any of its employees, directors, agents or affiliates), or vice versa, except where strictly necessary in the ordinary course of business (for example, where required for compliance with external regulatory and/or accounting obligations) and on the basis that, should the transaction be prohibited, any records or copies (electronic or otherwise) of such information that have passed, wherever they may be held, will be returned to the business to which they relate and any copies destroyed.
If all of this seems complicated and possibly ominous to the future of the newly minted Diebold Nixdorf, don't forget that:
- as previously explained, the CMA inquiry has bearing only on the U.K. market and the companies' business dealings as they affect only that market; and
- the CMA could find further inquiry unnecessary based on Diebold's responses to the authority's concerns.
Diebold emphasized through its spokesperson that, " ... we, of course, continue to cooperate with the CMA's review and will provide responses to their latest set of questions. … Until that time when we may be able to integrate in the U.K., Diebold and Wincor Nixdorf will operate as separate companies there."
Of course it will be tricky proceedings in the U.K. if Diebold and Wincor find it necessary to operate independently in that one market on the either side of a "Chinese wall." But it certainly wouldn't be the first time a company was obliged to play by a particular set of rules in a particular market.
In fact, China itself comes to mind. Government regulations in that all-important emerging market now require all nondomestic ATM suppliers to establish joint venture partnerships with domestically based third-party providers or face banishment. All of the major providers have, of course, scrambled to comply, despite the added inconvenience and business expense.
Similarly, Diebold will almost certainly act to preserve the benefits it believes will accrue from the Wincor acquisition, despite the inconvenience of having to make certain business accommodations to suit the CMA, if it should come to that.
It's a big complicated business world with big complicated agendas and interests at stake. If any one of them were capable of throwing a death-dealing blow at any venture at any time, no company would ever pursue global growth — not for all the ATMs in China. Or, for that matter, the U.K.
Detailed information related to the CMA investigation can be found on the authority's case page.
cover photo istock
Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally. She is now the editor of ATMmarketplace.com and WorldofMoney.comwww