Otis Ltd / Estec Ltd

OFT closed case: Completed acquisition by Otis Ltd of Estec Ltd.

Affected market: Escalators

No. ME/1116/04

Please note square brackets indicate figures either deleted or replaced by a range at the request of the parties


Otis Limited (Otis) is a leading multinational provider of the manufacture, installation, servicing and repair of lifts and escalators. It has a network of depots throughout the UK. Otis is ultimately owned by United Technologies Corporation of the US. Estec Limited (Estec) is an escalator service and repair company with an annual turnover of around £1million. It is based in Keighley, West Yorkshire and has additional staff in Glasgow, London and the West Midlands.


Otis acquired Estec Limited on 30 April 2004 for the sum of £[ ]. The parties made an informal submission to the Office of Fair Trading on 28 June 2004 and the administrative timetable expires on 23 August 2004 and the statutory deadline for consideration of the merger expires on 29 August 2004.


As a result of this transaction Otis Limited and Estec Limited have ceased to be distinct. The parties overlap in the supply of escalator servicing/repair and refurbishment and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.


The parties overlap in the provision of servicing/repair and refurbishment of escalators.

Product scope

On the demand side there are no alternatives for the servicing and repair of escalators in that it is essential to retain the equipment in good order. Some larger users of escalators such as London Underground undertake a large proportion of such work in-house. However, overall there is a trend towards out sourcing and most customers would not have the option of in-house provision. The competitive constraint from the use of in-house provision would not, therefore, represent a substantial competitive constraint on the merged entity.

On the supply side some escalator servicing contracts are tendered jointly with lift servicing contracts. There is some cross-over in skills required to service and repair escalators and lifts. However, in order for an operative to become competent in the provision of servicing and repairing escalators it is necessary for the engineer to undertake on-the-job training in addition to relevant training courses. For this reason supply side substitution is unlikely unless the competitor already has the relevant knowledge and expertise of escalator servicing and repair to be able to offer an operative on-the-job training.

Escalator refurbishment is a relatively small sector. Typically it is more cost effective, given the costs associated with an escalator that has reached its life span being out of action, to replace rather than refurbish the escalator. One exception to this is the London Underground network where escalators are embedded and cannot simply be replaced.

Geographic scope

Third parties have indicated that in order to provide escalator repair and servicing it is necessary to be located within a suitable distance of the customer (around 60-100 miles). This is in order to provide a timely response to breakdowns. However, Estec had operatives based in four locations prior to the merger but served a number of national contracts. In addition, many escalator contracts are national as many escalator users are retail chains. Notwithstanding the relatively short distance range indicated by third parties it is appropriate, therefore, to consider the impact of this transaction at a national level.


Market shares

Escalator service/repair: There are no definitive shares of supply figures available. Otis estimates that it has around [5-15 per cent] market share of service and repair of escalators but was unable to provide share of supply estimates for its competitors. The Lift and Escalator Industry Association (LEIA) indicated that there are 7,100 installed escalators in the UK. Otis and Estec have service contracts for around [ ] and [ ] respectively, giving a combined share of supply of [60-70 per cent] (increment [0-5 per cent])(see [note 1]).  However, Kone indicated that it itself had a share of [40-50 per cent] of servicing, with Otis the second largest supplier. Other estimates suggest that around [10-20 per cent] of supply comes from outside the 'big four' suppliers (Kone, Thyssen, Schindler and Otis). However, it is clear that the acquisition of Estec represents a relatively small accretion to Otis' existing share of supply in this sector.

Overall, the lift and escalator service and repair sectors together are characterised by the presence of the big four international lift and escalator suppliers with some smaller independents and specialist companies active in the escalator sector alone. There are some smaller independent firms who are active in both the provision of lift and escalator services. The evidence suggests that Otis and Estec were not close competitors in the escalator sector as Estec was not actively bidding for tenders, instead preferring to work on a negotiated contract basis whenever approached by customers.

Escalator refurbishment: Otis estimates its share of supply to be in the region of [35-45 per cent], mainly with London Underground. Otis further estimates that Kone holds a share of supply in this sector in the region of [25-35 per cent] (see [note 2]).  Estec's main focus was in the servicing and repair sector, producing minimal sales in the refurbishment sector.

Barriers to entry and expansion

Evidence presented to the Office suggests that barriers to entry to the provision of escalator servicing and repair are relatively low for an individual already qualified and experienced in the servicing and repair of escalators. For such an individual the costs of setting up a business would be minimal, covering company registration, the purchase of equipment (estimated at £25,000 by one third party) and insurance. Estec and others have entered this market in such manner i.e. individuals breaking away from one of the major suppliers and setting up their own firm.

Whilst entry on a small scale may be relatively easy, it could be considered more difficult for new entrants to expand and to offer a truly national service. However, Estec itself was competing from a base of four locations and servicing some national contracts. This indicates that expansion to a national level is achievable.


Customers were largely unconcerned about the transaction believing that sufficient alternative options are available. While some concern was raised by smaller competitors in that they were not keen to see Otis absorb a fellow small competitor, large lift and escalator companies were not concerned as they did not see Estec as a direct competitor or a strong competitive constraint on Otis.


The escalator service and repair sector is characterised by the presence of four major international lift and escalator companies as well as some smaller suppliers. Estec was a small player and offered limited competitive constraint on the big four suppliers. Overall, the small accretion to Otis' share of supply resulting from the merger with Estec does not significantly alter the structure of the market.

Barriers to entry, particularly at local level, are low. Should there be an incentive to do so, there would appear to be little to prevent individuals setting up their own small scale competing businesses using the experience gained in-house with one of the major firms.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.


This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.


  1. Otis wishes to state that it agrees there are no definitive shares of supply available and the figures stated should be considered on that basis.
  2. Otis wishes to state that this is an estimate only, supplied at the OFT's request, and is not based on detailed market analysis.
Published 19 August 2004