What Could the Impacts of Tesco’s Takeover of Booker Be?

Tesco’s recent takeover of Booker, Britain’s largest wholesaler, has certainly ruffled some feather amongst certain groups, and the controversy is likely to continue for the foreseeable future.

As the effects of this significant move become clearer, it is likely that all eyes will be on Britain’s largest grocer.

Here are some of the possible effects the move could have.

Tesco Booker

Competition

This move will see Tesco gain an even larger share of the market, and thus extend its influence on numerous different stores across the country. There are fears that this will severely harm competition in 350 areas, which has caused the Competition and Markets authority to launch an investigation into the deal.

Smaller independent businesses could see their influence curbed, and those which are owned by Booker could well see the services they offer reduced in a bid to persuade customers to go to Tesco stores instead. If this were to happen, there may be consequences for shoppers, who would have less of a say in where they get their groceries.

Less profits for Tesco

Some shareholders have been critical of the deal, claiming that Tesco are being too generous in their offer. There are also concerns that the growth which Booker has enjoyed (and which likely influenced the deal) is not a permanent fixture, and that value will not be created for Tesco’s shareholders.

Tesco already had to pay hefty fines in 2014 in order to avoid prosecution for profit overstatement, so its reputation is already suffering. Now that the deal has made headlines and private shareholders have voiced their concerns, the deal could well serve to damage the supermarket’s reputation further, especially if it turns out to be less successful than Tesco hopes.

Further Takeovers

It is worth noting, however, that Tesco is not alone in seeking to make deals to stimulate their own growth, with Sainsbury’s also looking to forge a deal with the corner shop chain Nisa. This shows a huge shift in supermarket behaviour, with aggressive takeovers seemingly becoming common.

If the Nisa deal goes through, it could well set a benchmark for other supermarkets to follow suit and seek to buy out even more smaller businesses. This would shrink the supply chain further and could result in supermarket dominance in the near future.

Greater Regulation

Should Tesco’s deal prove to be harmful to the consumer and shareholders, there will no doubt be a call for greater regulation and audits for large companies in the future. With supermarkets now playing an aggressive game, the backlash could be equally aggressive against them.

That being said, the future is still uncertain, and the deal could also work well for the supermarkets, stimulating growth and potentially instigating even more deals further down the line.

The impacts of the Tesco-Booker deal are yet to be fully felt, but there are certainly groups who are dissatisfied. As time goes on, more supermarket deals may well materialise, although this could prove damaging to them if they are seen to choke out smaller competition.