Consolidation trends prove that 40% market share need no longer be a full stop

4.10.2017

“Consolidation in the Baltics is unavoidable”, says Žygintas Mačėnas, co-founder and Managing Partner of SUMMA Advisers. “Saturated markets, limited organic growth prospects, the growing importance of cost-effectiveness and globalization pressure are the main trends behind the decreasing number of new market entrants and why consolidation is becoming the new norm”.

According to Žygintas Mačėnas, we see that bigger players are absorbing smaller ones, the market shows foreign-owned companies changing hands and small players merging. This is the reality we live in and consolidation cannot be ignored, just as we cannot avoid the fact that winter is coming. “Some may like it, some may not, yet you cannot say it is wrong or right, it comes irrespective of one’s feelings,” remarked Mačėnas.

Usually a market share of 40% and over is in itself an indication that merger clearance will not be granted. When competing with neighbouring giants from Poland, Germany or the Nordic countries, is this boundary reasonable and when might it be exceeded? This was a question that the Forum organizers asked, not only to business representatives but also to officials from the competition authorities from Estonia, Latvia and Lithuania.

Officials agreed that the rules of the game are changing in the Baltic markets, which is the reason why more mergers exceeding 40% market share have been cleared by local competition authorities. At the same time, though, Gunta Lokastova, deputy head of the Legal department at the Latvian Competition Council and Külliki Lugenberg, adviser to the Estonian Competition Authority, both agreed that high market shares provide an initial and powerful indication that a merger may create anti-competitive effects.

“Damage to local consumers cannot be outweighed for the sake of international success”, said Šarūnas Keserauskas, Chairman of the Lithuanian Competition Council. Hence, local competition authorities encourage companies rather to compete locally; and instead of buying competitors, cross-border acquisitions are encouraged.

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