The UK’s competition watchdog today announced that it was launching an investigation into whether Mitie’s acquisition of fellow outsourcing giant Interserve’s facilities management business could damage competition.
Back in June Mitie signed a £271m deal with its rival for the division, which will create a giant new entity with more than 80,000 employees.
The move will make the company the country’s largest facilities management group, and see Mitie increase its interests in the country’s troubled yet lucrative outsourcing industry.
The Competition and Markets Authority (CMA) has given interested parties a deadline of 29 September to comment on the deal.
Interserve declined to comment, but a spokesperson for Mitie said: “The transaction was voluntarily referred to the CMA for clearance and we are working closely with the CMA to progress the process”.
In order to fund the deal in light of the coronavirus crisis, Mitie also said it had launched a £201m rights issue.
Chief executive Phil Bentley described the acquisition as “transformative” for the company.
Since fellow outsourcer Carillion collapsed into administration in 2018, the whole sector has been under intense scrutiny. Lawmakers have called into question the wisdom of letting contracts to such firms on such small margins.
However, analysis from procurement data firm Tussell showed that since the coronavirus pandemic began, the UK’s six largest outsourcers have been awarded £1.3bn in contracts.
According to the research, which was published by the FT, Serco, Mitie, G4S, Interserve, Capita and Mears have been awarded 127 contracts since 1 February.
Only £205m of these were directly related to the pandemic, however, such as Serco’s deal to help run the NHS Track and Trace programme.