OFT clears Arlingclose/Sterling merger
0The Office of Fair Trading has cleared the merger between treasury consultancy firms Arlingclose and Sterling. The text of the OFT’s decision gives an interesting analysis of the players in the local authority treasury consultancy market.
The OFT opened its investigation into the merger in November 2012. In its decision it reported that it agreed with Sterling’s assessment that “Arlingclose was perceived to be an average to high quality, high price operator and that Sterling was an average quality, low price operator.” Sterling did not, found the OFT, offer the same depth and breadth of services as either Arlingclose or Sector.
According to marketplace feedback to the OFT, Arlingclose offers a more comprehensive service than Sterling and holds a larger share of the market on a revenue basis than in volume.
Sterling, it found, had a 5-8% share of the market, making it the smallest player of the three consultancies. It had won only ten contracts for which is was not the incumbent since 2009, none of which were previously held by Arlingclose.
Arlingclose also gave some estimates to the OFT on the possibility of new entrants into the market. It would take five months, it said, between inception and entry into the market for a firm to switch from providing treasury management advice to private firms to providing it to local authorities, and take three years to recover the investment (the approximate cost of which was not disclosed in the report).
As reported by Room 151 in November, the OFT found that only a minority of third parties thought the merger posed a problem in terms of reduction of choice. Most were former Sterling customers. “The parties to the merger are differentiated by price and quality of their services and so are not close competitors for all customers,” concluded the report.
