At least for now, if a North American farm equipment dealership wants to buy, sell or merge their business it’s usually a simple matter of negotiating with an interested party along with “some” input from their OEM.
This is apparently not the case in Europe, where dealership mergers and acquisitions are subject to scrutiny by the European Commission under the EU Merger Regulation after the Commission’s thorough review process. A copy of a March 25, 2019 press release from the European Commission (shown below) addresses the proposed acquisition of Konekesko (distributor of Claas ag equipment) and Danish Agro (distributor of John Deere ag equipment).
After issuing “proposed remedies … subject to conditions,” it appears the acquisition of one dealership by another dealership was ultimately approved.
European Commission — Press release
Mergers: Commission approves Danish Agro's acquisition of Konekesko's Baltic and Finnish agrimachinery businesses, subject to conditions
Brussels, 25 March 2019
The European Commission has approved, under the EU Merger Regulation, the acquisition by Danish Agro of Konekesko's agricultural machinery distribution businesses in Finland, Estonia, Latvia and Lithuania.
The approval is conditional on the divestiture of Danish Agro's agricultural machinery distribution business in Estonia.
Danish Agro and Konekesko are both active in the distribution of agricultural machinery implements, spare parts and the provision of related after-sales services.
The Commission's investigation
The Commission examined the effects of the proposed transaction on competition in the following markets, where the activities of Danish Agro and Konekesko overlap:
(i) the distribution of agricultural machinery (for example standard tractors, special tractors, combine harvesters, forage harvesters or balers),
(ii) the distribution of agricultural machinery implements (for example swathers, rakes, ploughs, cultivators, rollers, seeders, sprayers or spreaders),
(iii) the distribution of agricultural machinery spare parts, and
(iv) the provision of related after-sales services.
The Commission was concerned that the transaction, as notified, was likely to lead to higher prices and lower service quality for Estonian customers of forage harvesters and combine harvesters. In these markets, Konekesko (distributor for Claas agricultural machinery) and Danish Agro (distributor of John Deere agricultural machinery) are the leading distributors and have been competing closely with each other.
The Commission found that no competition concerns would arise with respect to all other markets where the companies' activities overlap, due to the presence of a sufficient number of alternative suppliers on those markets.
The Proposed Remedies
To address the Commission's concerns, the companies offered to divest Danish Agro's activities of distribution and sale of agricultural machinery implements, spare parts and provision of after-sales services in Estonia. These businesses are carried out by OÜ Baltic Agro Machinery, including in particular the distributorship agreement with John Deere.
The commitments fully address the Commission's concerns in relation to the distribution of forage harvesters and combine harvesters in Estonia and ensure that the divestment business will be a viable competitor to the merged entity.
Therefore, the Commission concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns in Estonia. The decision is conditional upon full compliance with the commitments.
Companies and Products
The Danish Agro Group, based in Denmark, is active in the sale of agricultural machinery and provision of after-sales services, as well as in the sale of animal feedstuff mixes, premix and vitamin mixes, fertilizer, pesticides, seed, energy and the purchase of crops from farmers.
The Konekesko companies in Estonia, Latvia and Lithuania, as well as the assets of Konekesko Oy in Finland, belong to the Kesko Group's agrimachinery business, which is active in the import, sale and provision of after-sales services of agricultural machinery.
Merger Control Rules
The transaction was notified to the Commission on 4 February 2019.
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).