Anonymised, illustrative composite. The divested package was a different transaction from the one being cleared: a forced sale, on a timetable, to a buyer somebody else had to accept.
At a glance
A national equipment-rental operator agreed to acquire a nine-branch regional business for $164,000,000. Seven branches sat in territories where the buyer had no presence. Two did not: in one small city and one suburban corridor the parties were the only two general-rental yards inside a practical delivery radius, and the Bureau's market contacts confirmed contractors do not drive past one yard to reach another.
Nobody expected the deal to be blocked. The parties expected to fix it, and the mechanism for fixing it is a consent agreement.
The parties had modelled the remedy as a disposal. Two branches would be identified, marketed and sold, and the proceeds would offset the price. The financial model carried them at the same 5.1× EBITDA multiple the whole business had been bought at.
That is not what a divestiture is. A branch sold under a registered consent agreement is sold by a seller who must sell, within a fixed period, to a purchaser the Commissioner will accept, with a trustee behind the process if the deadline passes. Every one of those features moves price the same way.
The parties also had no view on who the purchaser could be. The obvious candidates — the two other national operators — would have recreated the concentration problem. The realistic universe was one regional independent and one equipment dealer contemplating entry.
The two branches generated $6,800,000 of revenue and $1,340,000 of branch EBITDA. At the acquisition model's 5.1× that is $6,834,000. Marketed as a compulsory divestiture over a fixed period, with one credible purchaser and one speculative one, the package cleared at 3.4×, or $4,556,000 — a shortfall of about $2,278,000. Add a second sale process, seven months of hold-separate cost and the legal cost of the agreement and purchaser approval, and the total was around $2,600,000: 1.6% of a $164,000,000 enterprise value, in no model at signing.
The one number that did not move was the price for the target. The vendor of the nine-branch business was paid in full. The remedy cost fell entirely on the buyer, which is the usual allocation and the reason a buyer should price remedy risk before signing rather than assume the vendor shares it.
s.105(1) provides that “The Commissioner and a person in respect of whom the Commissioner has applied or may apply for an order under this Part, other than an interim order under section 103.3, may sign a consent agreement.” Two constraints then define what such an agreement can be.
The first is substantive. s.105(2): “The consent agreement shall be based on terms that could be the subject of an order of the Tribunal against that person.” That is the boundary of the Commissioner's bargaining power — she cannot extract by agreement what the Tribunal could not order. Under s.92(1)(e)(ii) the Tribunal may order a party “to dispose of assets or shares designated by the Tribunal in such manner as the Tribunal directs”, which is where a divestiture obligation gets its authority.
The second is procedural and it is what changes the commercial character of the exercise. s.105(3) allows the agreement to be filed with the Tribunal for immediate registration, and s.105(4) provides that “Upon registration of the consent agreement, the proceedings, if any, are terminated, and the consent agreement has the same force and effect, and proceedings may be taken, as if it were an order of the Tribunal.” A missed divestiture deadline is therefore not a broken promise; it is non-compliance with an order.
It is worth being precise about what the Act does not supply. No provision fixes a divestiture period, requires a hold-separate, or appoints a trustee. Those terms come from the agreement itself, which is why s.105(2) does the work it does — they are enforceable because they are terms the Tribunal could have ordered, not because a section names them. And the purchaser-approval mechanic is contractual too: the Act nowhere says the Commissioner picks the buyer. The agreement says it, and s.105(4) makes it bite.
One further provision matters to anyone affected by the remedy without being party to it. s.106(2): “A person directly affected by a consent agreement, other than a party to that agreement, may apply to the Tribunal within 60 days after the registration of the agreement to have one or more of its terms rescinded or varied.” Sixty days from registration, and the applicant must establish that the terms could not be the subject of a Tribunal order — a narrow ground, but a real one, and a deadline that runs whether or not anybody tells you.
The agreement was signed and registered with a seven-month divestiture period, a hold-separate obligation over the two branches, and Commissioner approval of the purchaser. The regional independent bought the package at 3.4×, having been in substance the only bidder who could be approved.
The buyer closed the main transaction on schedule. Its post-mortem changed two things in its playbook: remedy risk is now quantified before signing on any deal with an identified overlap, using a discount to the acquisition multiple rather than the multiple itself; and the divestiture buyer universe is mapped during diligence, because knowing there is only one acceptable purchaser is the single most important input into what the package will fetch. On the review that produces the remedy, see a third acquisition that flipped the burden of proof; on running the second sale, choosing between a broad auction and a quiet approach.
Missing the seven-month deadline would have handed the sale to the trustee the agreement provided for, whose mandate under that agreement was to sell rather than to sell well. The branches would have gone at whatever the one acceptable purchaser offered on the day — realistically a further turn or more below 3.4×.
Beyond price, s.105(4) means non-compliance is treated as if it were non-compliance with a Tribunal order, with the enforcement consequences that follow. The commercial lesson sits in the sequencing: the divestiture process should be run in parallel with the review, not started once the agreement is signed, because the period in the agreement is the period the Commissioner considers sufficient and it will not be lengthened to accommodate a seller who started late.
The tell was the multiple. A financial model that carries a compulsory divestiture at the same multiple as the acquisition is a model that has not understood that a forced seller with one available buyer does not achieve market price. The correct input is a discount, and the size of the discount is a function of how many purchasers the Commissioner would actually accept.
The second tell was that nobody had asked who could buy. That is answerable during diligence, from the market map the competition analysis already requires, and it drives the cost of the remedy more than any other single fact.
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