Fostering group offers deal to push through £400m merger
Neil Puffett
Thursday, March 16, 2017
A major independent fostering firm has offered to drop some elements of a £400m merger deal in order to push it through.
The National Fostering Agency Group bought Acorn Care Education Group in August last year creating a single organisation worth an estimated £400m.
However, last month the Competition and Markets Authority (CMA) announced it would be conducting a detailed merger investigation because of concerns that the coming together of the two foster placement service providers would give them a monopoly in some areas.
The initial CMA investigation reviewed all local authority framework areas in which the companies overlap in the UK, and found concerns in three framework agreement areas: Wales, Norfolk and the framework agreement area covering Luton, central Bedfordshire and Bedford.
In order to address concerns, the National Fostering Agency has offered to divest, or sell-off, parts of Acorn Care's business in three areas - Wales, Luton and Norfolk. It has said it will also allow the CMA to approve the buyer, or buyers.
"The proposed undertakings comprise the divestment of three Acorn businesses serving each of the relevant frameworks where the CMA found a realistic prospect of an SLC [substantial lessening of competition]," a CMA document states.
The CMA has said that it is currently considering the offer, but has indicated it is prepared to accept it.
"The CMA's starting point when assessing undertakings is to seek an outcome that restores competition to the level that would have prevailed absent the merger," the CMA document adds.
"The CMA believes that the proposed undertakings, or a modified version of them, might be acceptable as a suitable remedy to the SLC identified by the CMA.
"This is because the transfer of the carer capacity provided by the divestment businesses restores competition in relation to the supply of fostering placement services to the level that would have prevailed absent the merger within each of the three framework areas."
"The CMA therefore currently believes that the proposed undertakings may be capable of amounting to a sufficiently clear-cut and effective resolution of the CMA's competition concerns.
The CMA has said that, should it formally accept the offer, it will consult publicly on the suitability of the proposed buyer or buyers. It is due to make a decision on whether it accepts the offer by 10 April.
The market for independent fostering placement services is worth in excess of £750m a year and the companies are two of the largest national providers to local authorities.
Earlier this month Labour MP said she is concerned about the effect of increasing mergers of independent providers on the balance of power between councils and providers within the children in care market.
Speaking at an evidence session of the education select committee, Labour MP Lillian Greenwood also questioned the practice of independent fostering providers making a profit out of the placements they provide.
