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UK regulator puts NortonLifeLock merger with Avast on ice
Security vendors now have 5 working days to explain to the Competition and Markets Authority why it's wrong
The UK Competition and Markets Authority (CMA) merger inquiry into NortonLifeLock's proposed $8bn acquisition of rival antivirus provider Avast has now closed, with the regulator concluding that a tie-up could indeed reduce competition in the marketplace.
"Advanced discussions" concerning a merger of the two security vendors first surfaced in July 2021, when NortonLifeLock investors were told that a combination with Avast "would bring together two companies with aligned visions, highly complementary business profiles and a joint commitment to innovation that helps protect and empower people to live their digital lives safely."
By August, a deal had been agreed where NortonLifeLock would acquire all Avast shares for $8bn followed by the combined companies listing on NASDAQ.
At the time, the companies' boards said they "believe that the merger has compelling strategic and financial rationale and represents an attractive opportunity to create a new, industry-leading consumer Cyber Safety business."
NortonLifeLock shares jumped almost 5 percent at the news.
However, the deal drew the attention of the UK's competition regulator, which opened a merger inquiry on January 19 this year, saying: "The CMA is considering whether it is or may be the case that this transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002."
Having invited comments from industry and interested parties on the transaction until February 2, that investigation has now concluded.
The regulator stated today: "As the companies are close competitors, with few other significant rivals, the Competition and Markets Authority (CMA) is concerned that if completed the proposed deal could lead to a reduction in competition in the UK market. This could lead to UK consumers getting a worse deal when looking for cyber safety software in the future."
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- NortonLifeLock and Avast tie-up falls under UK competition regulator's spotlight
- Avast, ye takeover lawyers! NortonLifeLock to acquire security rival
A summary of the regulator's phase 1 decision, where it explains why the merger would lead to "a realistic prospect of a substantial lessening of competition," can be read here [PDF].
NortonLifeLock and Avast now have five working days to submit proposals to address the competition concerns. Once that has been received, the CMA will have five further working days to either accept the proposals or refer the case for an in-depth phase 2 inquiry.
David Stewart, the CMA's executive director, said in a statement:
We are living more of our lives online and it is vital that people have access to competitive cyber safety software when seeking to protect themselves and their families.
NortonLifeLock's proposed purchase of Avast could lead to a reduction in competition in the UK and ultimately a worse deal for consumers when looking for cyber safety software.
Unless the companies can offer a clear-cut solution to address our concerns, we intend to carry out an in-depth phase 2 investigation.
The Register has asked NortonLifeLock to comment.
This is far from the only example of the CMA inconveniencing technology companies lately.
Mark Zuckerberg's Meta threw its toys out of the pram after the regulator blocked the $400m merger of Facebook and Giphy in November, arguing that the CMA had acted "disproportionately", "irrationally", and "unfairly" when it launched a formal challenge to the decision in January.
It also played a significant role in the eventual collapse of Nvidia's scheme to buy Brit chip mainstay Arm.
Back in the security field, though, McAfee and Norton were both rapped by the CMA for their sharp software subscription auto-renewal processes in summer 2021, winning better refund rights for customers. ®