ACM: further investigation needed into acquisition of VolkerWessels

According to the Netherlands Authority for Consumers and Markets (ACM), the planned acquisition of Dutch construction company VolkerWessels by HAL Investments, which owns rival construction companies Boskalis and Van Wijnen, needs further investigation. This acquisition would create a group of large construction companies that play an important role in Dutch infrastructure.

ACM’s preliminary investigation has revealed that the acquisition may reduce competition in the civil-engineering sector. Less competition leads to higher prices and to less choice for clients. ACM has identified risks in three areas: in the tender processes for large and complex civil-engineering projects, in asphalt production, and in asphalt milling.

Large and complex construction projects

Following the acquisition, Boskalis and VolkerWessels are important competitors in tender processes for large road-construction projects and in those for large-scale construction projects where different disciplines are required. These companies have the size, the knowledge, and the experience for carrying out large-scale and complex projects. These include large-scale infrastructure projects with a major public interest that are coordinated by Rijkswaterstaat, which is the executive agency of the Ministry of Infrastructure and Water Management (I&W). Following the acquisition, a combination will be created with such a market position that it can lead to adverse effects on public clients and competitor construction companies.

In ACM’s investigation, public clients raised concerns regarding their choice of options as well as possible increases in the prices of large construction projects following the acquisition. Other large construction companies voiced their concerns about having fewer opportunities for collaborations after the acquisition. For construction companies, it is vital to be able to carry out very large and often complex projects together with partners. In almost all tender processes, they submit bids together with other construction companies. The acquisition could create one large competitor that is able to perform virtually all of the required specialist tasks within complex projects through its subsidiaries.

Asphalt and milling services

In addition, Boskalis and VolkerWessels will, after the acquisition, have a strong position in the asphalt production markets in three geographical areas: the cities of Amsterdam and Rotterdam, as well as in the central part of the Netherlands. In these regions, they own multiple asphalt plants. With regard to asphalt milling, too, the acquisition will result in the creation of a major competitor. Asphalt milling is the mechanical process of removing layers of asphalt using specialized equipment, for example for removing a damaged top layer. If the asphalt plants and milling companies of Boskalis and VolkerWessels fall into the same hands, there will be a risk that competition is reduced. Road construction companies may then be confronted with higher prices for asphalt and milling services, or with reduced supply.

In a possible further investigation, ACM will conduct a thorough assessment of the acquisition’s effects, before reaching its final decision.

Procedure

Businesses that wish to make an acquisition must notify ACM thereof if they exceed certain turnover thresholds. ACM subsequently assesses whether the acquisition will have any negative effects on people and businesses, for example, higher prices, reduced quality, or less innovation. On the basis of the preliminary investigation, ACM may decide that an in-depth investigation is needed is. That is the case here. If HAL and VolkerWessels wish to go through with their acquisition plans, they will have to apply for a license with ACM.

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. Competition ensures that products or services 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. ACM assesses whether the markets involved will continue to work well for people and businesses, now and in the future.