Affected market: House building
Taylor Woodrow plc (Taylor Woodrow) is active in the building and sale
of new housing in the UK, United States, Spain and Gibraltar. Wilson
Connolly Holdings plc (Wilson Connolly) is active in the building and
sale of new housing in the UK. The UK turnover of Wilson Connolly for
2002 / 2003 was £714.9 million.
Taylor Woodrow proposes to acquire Wilson Connolly for approximately
This is a pre-notified merger. The unextended statutory deadline is 1
As a result of this transaction Taylor Woodrow and Wilson Connolly will
cease to be distinct. The UK turnover of Wilson Connolly exceeds £70
million, so that the turnover test in section 23(1)(b) of the Enterprise
Act 2002 (the Act) is satisfied. It is therefore probable that a
relevant merger situation will be created.
The parties overlap in the supply of housing in the UK; specifically
they build and sell new housing in the UK. New houses currently account
for around ten per cent of all properties sold in the UK.
On the demand side, despite the numerous differences between new and
older housing, it is likely that these two groups exert a significant
competitive constraint on one another.
On the supply side, the techniques used to construct different styles of
houses are reasonably similar. It is likely, therefore, that companies
specialising in building different size or value properties could easily
alter the specification of future properties such that they could supply
different types of houses. The parties and the competitors contacted all
build houses of different types and values. They commented that there
were no significant issues with them building different types of houses
and that all but the smallest house builder would have the capability to
build houses of different values.
For the purposes of the following analysis, the frame of reference for
the product market will be the supply of new housing.
A regional element to the geographic market could arise as customers
generally seek properties in a specific area of the country rather than
on a nationwide basis. However, if sufficient customers are willing to
switch to a neighbouring area, a wider geographic market may exist.
Several companies provide new homes across the UK. Competitors commented
that there are few barriers for a house builder to expand into other
regions of the UK. This may suggest that the relevant geographic frame
of reference is wider than strictly regional.
This transaction is therefore evaluated on both a regional and national
The parties’ combined share of completions of new houses in 2002/2003
in UK is six per cent (increment two per cent). The HHI at a national
level is around 250, with the increment due to the merger of 16, showing
the fragmented nature of the industry. There are around 117 firms that
built more than 100 houses in 2002.
Regionally the parties’ combined share of completions does not exceed
11 per cent in any region of the UK.
Shares of supply are, of course, lower if older properties are included
in the analysis.
Barriers to entry and expansion
Barriers to entry at a small scale appear to be low. Large scale entry
seems less likely given the size of land bank required. One potentially
significant barrier to entry is the availability of land for
As most houses are bought as individual purchases, buyer power is
unlikely to be an issue.
No vertical issues were raised by this merger.
THIRD PARTY VIEWS
Competitors were unconcerned about this merger.
The merger was examined using the supply of new housing in the UK and
regionally as frames of reference. The share of supply of the merged
entity on any of these frames of reference would be low in a fragmented
industry. Barriers to small scale entry appear low, although larger
scale entry appears less likely.
The OFT does not believe that it is or may be the case that the creation
of the relevant merger situation may be expected to result in a
substantial lessening of competition within a market or markets in the
United Kingdom for goods or services.
This merger will therefore not be referred to the Competition Commission
under section 33(1) of the Act.