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# Macfarlanes, A&O Shearman lead on PE Food Deal
- URL: https://www.ziplaw.uk/macfarlanes-a-o-shearman-lead-on-pe-food-deal/
- Published: 2026-06-08T09:54:12.000Z
- Updated: 2026-08-06T20:37:09.000Z
- Description: Walker Morris and Freshfields are also involved on this deal.
- Author: ZipLaw
- Tags: Deals, Macfarlanes, AO Shearman, Walker Morris, Freshfields, #tc-lab

**In Short:** The UK's competition regulator has softened its stance on Associated British Foods' planned takeover of rival bread-maker Hovis, provisionally finding that the deal is unlikely to harm competition in Northern Ireland. A final decision is due by 24 June.

**What is the deal?** Associated British Foods PLC, owner of the Kingsmill brand through its struggling Allied Bakeries division, wants to buy Hovis from private equity firm Endless LLP. The financial terms have not been made public. If it goes through, the deal would bring Kingsmill, Hovis and Sunblest under one roof, creating one of the biggest players in branded bread in Britain.

The sticking point has been the Competition and Markets Authority (CMA), which has been scrutinising whether combining two big bread brands would leave shoppers worse off. Its focus landed squarely on Northern Ireland and a handful of very specific products: plant bread, pancakes, potato farls and soda farls. The CMA has now changed its tune. Having initially worried the merger could weaken competition, it has provisionally concluded the deal is unlikely to cause a problem, partly because it now thinks Allied Bakeries might shrink or pull out of Northern Ireland anyway, with or without the merger. AB Foods, for its part, argues the acquisition is the only realistic way to build a profitable, investable bakery business.

**Key Legal Points to discuss in applications & interviews:**

1. **The "substantial lessening of competition" test:** This is the heart of UK merger control. When the CMA reviews a deal, it is not asking whether a merger is good or bad in some general sense. It is asking a narrower question: will the deal result in a substantial lessening of competition, often shortened to an SLC? If the answer is yes, the regulator can block the deal or demand changes. Here the CMA has provisionally found no SLC in the relevant Northern Irish markets, which is exactly the conclusion AB Foods needs to get the deal over the line.
2. **The counterfactual and the "exiting firm" argument:** This is why the CMA changed its mind, and it is genuinely clever. To judge a merger, regulators compare two pictures: the market with the deal, and the market without it. That second picture is called the counterfactual. The trick is that the counterfactual is not always "everything stays as it is today". Here the CMA now believes Allied Bakeries would likely shrink further or leave Northern Ireland regardless. If that division is going to fade away anyway, then the merger does not really make competition worse, because the rivalry was disappearing either way. This is sometimes called the exiting firm or failing firm scenario, and it can rescue a deal that would otherwise face objections.
3. **How narrowly markets get defined:** Notice that the CMA did not look at "bread" as one giant national market. It zeroed in on plant bread, pancakes, potato farls and soda farls, specifically in Northern Ireland. This is market definition in action, and it matters enormously. The narrower the market a regulator draws, the more likely a deal looks like it concentrates power, because there are fewer players to count. Potato bread and soda bread are local staples in Northern Ireland, so competition there gets assessed on its own terms rather than being lost in the UK-wide picture. For anyone interested in competition law, this is a neat example of how the boundaries of a market can shape the entire outcome.

**Who is advising on this?**

- **A&O Shearman** is advising Associated British Foods on the transaction, with **Macfarlanes LLP** handling competition matters for the company.
- **Walker Morris LLP** is advising Endless and Hovis, with **Freshfields LLP** providing antitrust counsel to those companies.