Heidelberg Materials is one of the largest building materials manufacturers in the world, producing cement, aggregates, concrete, and many other construction materials. In the UK, Heidelberg Materials UK—formerly Hanson—is a leading supplier of heavy building materials to the construction industry, operating around 300 sites and employing more than 3,500 people.

In late 2022, Heidelberg Materials UK announced an agreement to acquire Mick George Limited (MGL), a construction and demolition waste recycler in the East of England and the East Midlands with more than 1,000 staff and more than £200 million in annual revenues. MGL would assist Heidelberg Materials UK in strengthening its circular materials offering, improving sustainability, and accelerating the move to net zero. The transaction required clearance from the UK Competition and Markets Authority (CMA).

Heidelberg Materials UK retained NERA Senior Managing Director Grant Saggers—assisted by Director Adrien Cervera-Jackson, Consultants Rafael Sambeatand, Daniel Sullivan and team (Vivek Madlani, Tanya Narang, Hamza Shoaib, and Kate Eyre)—to evaluate the likely competitive effects of the transaction. NERA worked with Pinsent Masons LLP (for the acquiror) and Fieldfisher LLP (for the target) to engage with the CMA on the economics and empirical evidence throughout the merger investigation.

The CMA was minded to build a ‘Decision Rule’ to evaluate the horizontal and vertical issues that could arise in local markets as a result of the transaction. Decision Rules are increasingly used in local market analyses in the UK but require detailed and robust underlying datasets of all key competitive factors in and across the local markets under investigation. Decision Rules also need careful design to capture the interlinkages between different players in the markets.  

NERA helped the CMA develop the underlying datasets to compute linear weighted market shares across multiple markets in the East of England and the East Midlands. This included programming algorithms to determine over 100,000 drive-time pairs and to weight production shares depending on distance, material, and delivery mode. NERA also helped the CMA program more complex rules to assess vertical theories of harm in various markets. Ultimately the areas of concern could be narrowed down to a small number of local markets in which the parties overlapped and had higher combined shares. This allowed a focused discussion on competitive effects, targeted information gathering from third parties, and clarity on appropriate remedies to the remaining concerns in a small number of local markets.

NERA’s work helped secure Phase I clearance before the CMA, subject to a small number of aggregates quarry and concrete plant divestments considered as acceptable remedies offered by the merging parties.