Outcome of CMA’s Welltower Phase 1 merger investigation

The Competition and Markets Authority (CMA) has completed its Phase 1 merger investigation into Welltower’s acquisition of the real estate interest in 647 care homes managed by Barchester Healthcare, HC-One, Aria Care (including Asprey Healthcare) and Danforth Care, and the associated takeover by Apex Healthcare and Care UK of the day-to-day operation of these homes.

What were the CMA’s conclusions?

The CMA has found that each of these acquisitions has given rise to a realistic prospect of a substantial lessening of competition (SLC). 

Welltower and Apex have been given until 14 May 2026 to offer undertakings in lieu of a reference (UILs) to the CMA to remedy the competition concerns identified. A UIL is a commitment to take specific steps for the purpose of reversing or mitigating the SLC. If satisfactory undertakings are offered which address the CMA’s concerns, this will avoid it having to refer the acquisitions for a more in-depth Phase 2 investigation.

What harms to competition have been identified?

The CMA’s investigation focussed on the impact the acquisitions will have in two separate markets:

• supply of residential care services for the elderly (Residential Care) 
• supply of nursing care services for the elderly (Nursing Care).

It found that both markets are local in nature, since location is one of the most important factors when choosing a care home. It therefore assessed the competitive impact of Welltower’s acquisitions by geography, determining which local markets are affected based on the drive-time catchment areas around each site. 

The CMA assessed two types of harm to competition as follows:

Welltower’s influence over the Residential Care and Nursing Care markets

The first is the potential for harm from Welltower’s role in the supply of Residential Care and Nursing Care. Even though Welltower is a real estate investment trust (REIT) rather than a care home operator, the CMA found that it has both the ability and the incentive to influence the provision of Residential Care and Nursing Care from the care homes it owns. For homes owned through the US REIT Investment Diversification and Empowerment Act of 2007 (RIDEA) tax structure, this influence arises from its right to approve business plans and budgets, its responsibility for capital investment in the homes and its right to terminate operator contracts even if there is no breach. The CMA found that Welltower does not have substantial influence over the running of the care homes owned through a triple net (NNN) lease structure because it cannot unilaterally adjust the terms of the operator contract, but it nevertheless concluded that these homes may not in practice be operated independently of Welltower due to the broader commercial arrangements in place between Welltower and the operators concerned.

Considering the potential for harm to competition as a result of Welltower’s increased influence over each of the local markets affected by the acquisitions, the CMA found a realistic prospect of a SLC in relation to the provision of Residential Care in 7 local areas, and in relation to the provision of Nursing Care in 21 local areas.

Whether the acquisitions have resulted in a SLC amongst care home operators

The CMA’s second area of focus was whether the acquisitions have resulted in a SLC amongst care home operators. It found that the care home operators also have both the ability and the incentive to influence the competitive offering of the newly-acquired Welltower care homes which they operate and concluded that the HC-One acquisition has resulted in a SLC in 2 local areas in relation to Residential Care, and in 8 local areas in relation to Nursing Care.

Overall, taking into account that some care homes deliver both Residential Care and Nursing Care, the CMA has found that there is a realistic prospect of a SLC in 30 local areas.

What happens next?

Welltower and Apex have until 14 May 2026 to offer undertakings in lieu of a reference (UILs) to the CMA that will remedy the competition concerns identified. Unless they offer satisfactory undertakings, the CMA will refer each of the acquisitions for a Phase 2 merger investigation.

What are the implications for others in the care home sector?

In cases such as this, we would usually expect the undertakings to involve a commitment to sell care homes (and transfer operator contracts) in those local areas where a SLC has been identified, in order that a sufficient level of competition can be restored in those areas.

If divestments are offered, they are likely to need to be made within a prescribed timescale and to CMA-approved purchasers, with an undertaking to continue ensuring that the affected homes are operated at arm’s length from Welltower and Apex in the meantime, with no further steps taken towards integration.

A divestment process would create acquisition opportunities for other parties.

Updates regarding the CMA’s investigation can be found on the CMA’s case page.

Our healthcare team are currently advising a number of clients on the impact of the CMA’s investigation including on the CMA’s powers and remedies. Please contact Vincent Buscemi, Sarah Skuse, or Bethan Lloyd for support.

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