ACM clears acquisition of pallet sellers DWP and Vierhouten by competitor Foresco and investigates strategy of ‘serial acquisitions’

The Netherlands Authority for Consumers and Markets (ACM) has granted pallet seller Foresco a license for the acquisition of its competitors DWP and Vierhouten. Foresco, DWP, and Vierhouten sell different types of wooden pallets. ACM does not expect prices to go up as a result of this acquisition. ACM’s investigation has revealed that, following the acquisition, Foresco will still face sufficient competitive pressure from other pallet sellers. Buyers have various alternatives besides Foresco.

Investigation into Foresco’s acquisition strategy of ‘serial acquisitions’

ACM has assessed this acquisition within the context of Foresco’s broader acquisition strategy. Over the past few years, Foresco has become the market leader in the Netherlands by making various smaller acquisitions. A strategy aimed at making a series of smaller acquisitions (that may or may not need to be notified) is referred to as a strategy of ‘serial acquisitions’ (or ‘roll-up acquisitions’). A series of smaller acquisitions can have the same harmful effects on competitors, buyers, and consumers as a single major acquisition can.

Of the 17 acquisitions of pallet sellers with activities in the Netherlands that Foresco made between 2019 and today, ACM had previously already been able to assess four of them. The other 13 acquisitions were below the turnover thresholds for mandatory notification to ACM.

This is the first time that ACM assessed an acquisition within the context of a strategy of serial acquisitions (or roll-up strategy). In its decision, ACM explains what assessment framework it uses in such cases. ACM not only looks at the effects of the acquisition at hand, but also at the effects of all of the previous acquisitions (including those that were not notified), and also takes into account the effects of future acquisitions that are sufficiently likely to go through. The investigation into the acquisition of DWP and Vierhouten has generated insufficient concrete indications that Foresco’s acquisitions made over the past several years have had any negative effects, and that Foresco will continue to use this strategy in the same way. Therefore, ACM, at the moment, does not see any risks that Foresco is able to implement any price increases with this transaction.

ACM’s concentration control: mergers, acquisitions, and joint ventures

With any merger, acquisition, or joint venture, there is a question of whether sufficient competition will remain on that market, right after the concentration as well as in the subsequent years. Competition ensures that products are of high quality, and that they are offered on the market at competitive prices. Competition also promotes innovation. That is why ACM decides in advance whether or not companies are allowed to join forces. An acquisition cannot go through if the concentration has negative effects on competition and, by extension, on price, quality, or innovation, and therefore ultimately also on consumers. ACM assesses whether the markets involved will continue to work well for people and businesses, now and in the future.