In December 2023, Macquarie Asset Management (Macquarie) agreed to acquire shares representing 50% of the total voting rights in Last Mile Infrastructure (LMI) from Infracapital. This qualified as a merger that required review and approval by the CMA in the UK.

LMI supplies “last mile” connections between homes or businesses and essential utility service suppliers, such as gas, electricity, water, sewage, and fibre. LMI designs and installs thousands of single and multi-utility connections across the UK every year. It also adopts connections it owns, maintains, and operates on an ongoing basis. LMI is one of the largest independent network owners in the UK.   

Macquarie, via its investment funds, had interests in horizontal competitors to LMI such as Matrix Group (a supplier of electricity connections), in upstream suppliers to LMI such as Cadent (a gas distribution network) and Southern Water (a water and wastewater network), and in downstream retail activities that interact with connections suppliers. This meant the CMA needed to assess the impacts of the merger on competition in a range of horizontal and vertical relationships, with a primary focus on the electricity, gas, and water/sewage sectors.

As this merger would also bring together an incumbent gas distribution network operator, Cadent, with an independent gas network operator, LMI, the CMA needed to assess whether the merger would prejudice the ability of the Office of Gas and Electricity Markets (Ofgem) to undertake the benchmarking necessary for fulfilling its regulatory responsibilities. This required separate submissions to Ofgem under the new Energy Network Special Merger Regime introduced in 2023.   

Working with a combined team of competition, electricity, gas, and water economists, NERA provided economic advice to the clients and their external legal counsel at Linklaters LLP and Clifford Chance. Senior Managing Directors Grant Saggers and George Anstey led engagement with the CMA and Ofgem, supported by Director Leen Dickx and Consultants Maximilian Czernin, Rafael Sambeat, Federico Sciacca, and Hamza Shoaib.

The NERA team assisted the merging parties through pre-notification and the CMA Phase 1 process. NERA presented evidence on competition in the affected market at CMA teach-ins, in NERA reports, and at the CMA Issues Meeting in September 2024. As part of the new Energy Network Special Merger Regime, NERA also submitted information to Ofgem on the transaction’s effects on the regulator’s ability to benchmark.

In terms of horizontal theories of harm, NERA assisted in defining markets and estimating shares across installation and adoption markets in electricity, gas, and water/sewage. NERA also conducted a large bidding analysis for the CMA to show the parties were not close competitors. NERA worked with the CMA economics team to ensure all horizontal issues were resolved.

In terms of vertical theories of harm, there were more than seven channels through which the merger could affect the supply relationships. NERA worked with the merging parties and legal counsel to demonstrate the parties had no ability or incentive to foreclose competition.   

The CMA was satisfied with the quality of evidence and approved the transaction unconditionally in September 2024, with its decision available on the CMA website at case reference ME/7039/23.