COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no: 64/LM/Aug04
In The Large Merger Between:
Nedbank Ltd, Investec Ltd, Hosken Consolidated Investments Ltd
And
The IQ Business Group (Pty) Ltd
Reasons for Decision
Approval
1. On 27 October 2004 the Competition Tribunal issued a Merger Clearance Certificate
approving the transaction between Nedbank Ltd, Investec Ltd, Hosken Consolidated
Investments Ltd and The IQ Business Group (Pty) Ltd. The reasons for this decision follow.
The Parties
2. The primary acquiring firms are Nedbank Ltd (“Nedbank”), Investec Ltd (“Investec”) and
Hosken Consolidated Investments Ltd (“HCI”).
3. Nedbank is ultimately controlled by Old Mutual Plc, a company listed on the London
Securities Exchange. No firm controls Old Mutual Plc. Investec is not controlled by any
single entity and is listed on the JSE Securities Exchange. Its largest shareholder grouping
comprises an empowerment consortium (comprising the Tiso Group, the Peu Investment
Group, a broadbased Entrepreneurship Development Trust and an Investec Employee
Share Trust), which holds 25,1% of the issued shares of Investec. Sactwu Educational Trust
and Southern African Clothing and Textile Workers Union jointly control HCI (11% and 34%
respectively).
4. The primary target firm is The IQ Business Group (Pty) Ltd (“IQ”). Preacquisition, the
primary acquiring firms are shareholders in the target firm.
The transaction
5. The transaction involves the acquisition of additional shares in the IQ’s share capital by the
acquiring firms. This in effect amounts to a recapitalisation of IQ Business Group.
The Parties’ Activities
6. Nedbank provides banking and related services through out the Republic of South Africa.
Investec provides a wide range of financial products and services, viz. investment banking,
treasury and specialized finance, private banking and client portfolio management and asset
management. HCI is an investment holding company, which invests in the media and
broadcasting, gaming, information technology and financial services.
7. IQ provides project management and process enhancement services including the use of
information technology skills and tools to achieve such business process enhancement. IQ
designs, implements and manages technology enabled business processes in financial
services, healthcare and supply chain management. 1
Impact on competition
8. None of the acquiring firms are involved in the same market as IQ. However, while there is
no horizontal overlap in the activities of the parties, IQ and Nedbank are in a vertical
relationship as IQ provides services to Nedbank. Along with Nedbank, IQ also provides the
following services to other banks: Project management, business analysis, software
development and contracting. These services are provided as composite packages of
services to their clients.
9. IQ is, however, a relatively small player as its market share is below 10%. There are a
number of other players in the market and according to a competitor of IQ, the service
market was a “buyers market in that customers [were] always playing one competitor
against the other and service contracts [were] for a short period allowing customers to
switch to alternate providers if they were unhappy with services rendered.” 2 The
Commission in its investigation found that if customers of IQ, the banks in particular, did not
wish to source their services from IQ they could switch to other providers of project
management services.
Conclusion
10. Having regard to the above, we conclude that the merger will not lead to a substantial
lessening of competition and there are no significant public interest concerns. Accordingly,
we agree with the Commission’s recommendation that the transaction be unconditionally
approved.
04 November 2004
1 When asked by the tribunal to describe, in layman’s terms, what services IQ provides, Mr Pieter van
Tonder, Group Financial Director of the IQ Business Group, replied that in essence IQ simplified business
processes by applying technology in order “, to enable businesses to achieve maximisation [of the whole
design of the system]”. With regard to the services provided to the banks, IQ, for example, helped simplify
the home loan application process (which took about 3035 days), by developing a system, which
reduced the process to 2 days. At page 12 of the transcript.
2 At page 5 of the Competition Commission’s report.
2
D Lewis Date
Concurring: N Manoim and M Mokuena
For the merging parties: L Mendelsohn and J Balkin (Edward Nathan & Friedland)
For the Commission: A Chetty (Mergers and Acquisitions)
3