COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 43/LM/Jul01
In the large merger between
Siemens Business Services (Pty) Ltd
and
Unihold Business Solutions Division of Unihold Group Ltd
REASONS FOR THE TRIBUNAL’S DECISION
Approval
The Competition Tribunal issued a Merger Clearance Certificate on 20 September 2001
approving the merger between Siemens Business Services (Pty) Ltd and Unihold
Business Solutions Division of Unihold Group Ltd without conditions. The reasons for
approving the merger are set out below.
The merger transaction
Siemens Business Services (Pty) Ltd (SBS) and Unihold Group Ltd have entered into a
transaction in terms of which operations of SBS will be merged with the IT business
solutions division of Unihold, which business is carried on by the Unihold Business
Solutions Division (UBS) of Unihold. The division will be integrated into SBS.
As part of the consideration for the sale of the UBS business to SBS, Unihold will receive
40% of the issued share capital in SBS so that after the transaction Unihold will hold 40%
of the shares in SBS, and a newlyformed Siemens Company, Siemens Business Services
Holdings (Pty) Ltd will hold the remaining 60% of the shares in SBS.
The parties allege that, as small individual players in the current IT market, they were
unable to provide to customers the quality and range of services they desired. They found
that organic growth was not a viable option and that a merger of the two businesses,
which complement one another, would create an IT services group that has the requisite
critical mass. Furthermore, the two groups have, in the past, worked together on a number
of projects.
Evaluating the merger
The relevant market
Both parties are players in the information technology services market in South Africa.
The UBS division is focussed on providing software solutions to its customers and a very
small component of its business provides infrastructure to its customers. SBS is focussed
on installation and maintenance of IT infrastructure.
The following diagram sets out the various business solutions services and the areas in
which UBS and SBS are currently active:
Business Solutions
Services
Services offered by UBS Services offered by SBS
Business strategy
Business Processes Professional Services
Consulting
Business Applications
and software
1. Business Information
Management (BIM)
2. Customer Relationship
Management (CRM)
3. E Commerce
SAP Enterprise Resource
Management (ERM)
IT Infrastructure Resells HP & Compaq Covers 80% of its South
African business
The areas in which the merging parties’ services overlap are Business Applications and
Software and IT Infrastructure.
In the business applications and software area SBS provides only SAP ERM, whilst UBS
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is involved in BIM, CRM and ECommerce. As far as the provision of IT infrastructure
goes, UBS is marginally involved, in that it resells Hewlett Packard and Compaq
components. For SBS 80% of its business in South Africa is conducted in the IT
Infrastructure area by providing infrastructure and database.
Both parties conduct their businesses in South Africa.
Impact on competition
Currently both SBS and the UBS division have market shares of less than 1% and
compete with players such as Dimension Data (market share of 12,7%), AST (market
share of 11,7%) and EDS (market share of 11,3%).
We agree with the Competition Commission that the merger should not have any
negative effect on competition and may actually result in the creation of a more effective
competitor that could challenge large players such as Dimension Data.
Public interest consideration
Except for employment, the transaction is unlikely to have a negative impact on any of
the other public interest issues.
As a result of the merger restructuring will be necessary in the finance, administration
and logistics area that could result in up to 40 members of staff being retrenched.
3 October 2001
D.H. Lewis
Concurring: P. Maponya and F. Fourie
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