1
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: LM170JAN22
Magnesium Bidco Limited (Acquiring Firm)
and
Mimecast Limited (Target Firm)
Heard on: 04 April 2022
Order Issued on: 06 April 2022
REASONS FOR DECISION
[1] On 6 April 2022, the Competition Tribunal conditionally approved a large merger
between Magnesium Bidco Limited (“Magnesium”) and Mimecast Limited
(“Mimecast”).
[2] The proposed transaction involves Magnesium acquiring the entire share capital of
Mimecast.
Parties to the transaction and their activities
Acquiring firm
[3] Magnesium is registered in accordance with the laws of England and Wales; is a newly
incorporated entity and does not conduct any activities. Magnesium is ultimately
controlled by Permira Holdings Limited (“Permira”).1 Permira and all the firms directly
and indirectly controlled by it will hereinafter be collectively referred to as the "Acquiring
Group". The Acquiring Group does not have any broad-based black economic
empowerment (“B-BBEE”) shareholding.
[4] The Acquiring Group, through its portfolio companies, is active across the consumer,
financial services, healthcare, industrial, and technology sectors. In South Africa, the
Acquiring Group, through its various investment funds, controls a number of portfolio
companies.2 Relevant to the proposed transaction are the activities of the Acquiring
Group in the broader market for the supply of information technology (“IT”) services in
South Africa. The Acquiring Group through its portfolio companies supplies software
distribution services, is a data centre provider, provides customer relationship
management software, is an employee experience management software provider, is
a data integration software provider, and a marketing solution provider. The Acquiring
1 Magnesium is indirectly controlled, as to 67.296%, through Permira Fund VIII- 1 SCSp and Permira
Fund VIII- 2 SCSp (“Permira Funds VIII”).
2
Fund VIII- 2 SCSp (“Permira Funds VIII”).
2
Group through, McAfee Security South Africa Proprietary Limited (“McAfee”),3 is active
in the wider supply of security software, specifically consumer cybersecurity software
solutions. McAfee provides consumer-level cybersecurity software solutions.
Target firm
[5] Mimecast is a company registered in accordance with the laws of Bailiwick of Jersey.
Mimecast’s ordinary shares are listed on the Nasdaq Global Select Market and it is not
controlled by any firms. 4 In South Africa, Mimecast controls Mimecast South Africa
(Pty) Ltd (“Mimecast South Africa”). Mimecast and all the firms directly and indirectly
controlled by it will hereinafter collectively be referred to as the “Target Group”. There
are no B-BBEE shareholders within the Target Group.
[6] The Target Group is a provider of cloud security and risk management services for
email and corporate information through an integrated suite of proprietary cloud
services that protect enterprise customers from the significant business and data
security risks they are exposed to through their emails and other corporate systems. 5
Relevant for the competition assessment, we note that the
and approximately of the Target Group’s annual recurring revenue in
South Africa is derived through the reseller and managed service provider channel in
South Africa, rather than directly to consumers. Further, Mimecast South Africa has
Competition Assessment
Horizontal assessment
[7] Both parties are active in the broad market for IT services in South Africa. More
narrowly, both are active in the provision of cybersecurity services. However, the
Acquiring Group (through McAfee) solely provides consumer-level cybersecurity
software solutions; while the Target Group solely provides enterprise-level
cybersecurity software solutions. The Commission investigated the extent to which
these two types of services are substitutable.
[8] The investigation revealed that the merging parties do not provide the same products
[8] The investigation revealed that the merging parties do not provide the same products
or services to the same customers. A significant degree of investment of both time and
resources would be required for a supplier of enterprise security software to enter the
market for the supply of consumer security software (and vice versa).6
3 McAfee Corp indirectly controls McAfee South Africa. McAfee Corp is a future portfolio company of
Permira. However, neither Magnesium nor the Permira VIII fund (controller of Mimecast) will acquire
any share ownership or voting rights in McAfee Corp. (McAfee Security South Africa Proprietary Limited
has not yet closed and is subject to a number of conditions, including the receipt of regulatory approvals.
The McAfee Transaction is currently anticipated to close in the first half of 2022.)
4 The shareholders of Mimecast that own more than 5% are: Blackrock Inc. and Peter Bauer.
5 The Mimecast Group’s primary offerings (including in South Africa) include: email security; continuity
and sync & recover; archiving; awareness training; web security; DMARC analyzer (which allows
customers to more effectively implement and manage complex domain-based message authentication
reporting and conformance); brand exploit protection (which provides continuous, proactive monitoring
for fake websites being used to launch phishing attacks exploiting an organization’s brand credibility
and trusted relationship with its customers or other stakeholders in the supply chain); and threat
intelligence.
6 Consumer-level cybersecurity software are off-the-shelf solutions primarily used by individuals or small
businesses. They are created to be easy to use and offer few options for customization. While
enterprise-level cybersecurity software represents a more sophisticated approach. They are designed
to protect larger organizations with more critical security needs. What they offer includes a vastly
Relevant for the competition assessment, we note that the
Relevant for the competition assessment, we note that the
South Africa, rather than directly to consumers. Further, Mimecast South Africa has
South Africa is derived through the reseller and managed service provider channel in
3
[9] These differences were also confirmed by three Mimecast customers.
confirmed that enterprise-level
software services are different from the consumer-level software services in
packaging, the engagements models, skills requirement, customer base and pricing
models. The Commission concluded that the merging parties’ group companies are
not close competitors in the market for cybersecurity software solutions; and that, when
properly understood, the merging parties’ activities in this market do not present a
horizontal overlap.
[10] Taking the above evidence into account, the proposed transaction is unlikely to give
rise to substantial lessening of competition as a result of horizontal effects.
Vertical assessment
[11] The merging parties have no existing vertical links. However, the Commission
identified potential vertical overlap in relation to their activities; in that, one of the
indirect subsidiaries of the acquiring group, Networks Unlimited,7 distributes enterprise
cybersecurity software services on behalf of Mimecast’s rivals.
[12] The Commission is of the view that the merged entity is unlikely to have the ability to
foreclose the merging parties’ competitors from access to enterprise cybersecurity
software services because (i) the Target Group is not a dominant supplier of enterprise
cybersecurity software services ( % market share 8); (ii) the Target Group does not
currently use distributors in South Africa to indirectly distribute its products; rather, it
distributes its products through resellers and Managed Service Providers (“MSPs”),
which operate at a level downstream from distributors; and (iii) the Acquiring Group is
unlikely to have the capacity to distribute all the products/services of the Target Group,
given its low market shares.
[13] The Commission found that the proposed transaction is also unlikely to lead to
customer foreclosure on account of the Acquiring Group’s low market share (6.2% 9)
customer foreclosure on account of the Acquiring Group’s low market share (6.2% 9)
and the fact that Mimecast’s rivals would have numerous other distributors in the
market to choose from; for example, Axiz (Pty) Ltd, Maxtec Peripherals (Pty) Ltd, First
Distribution, and Tarsus Distribution, amongst others.
expanded toolkit, additional features and the support of experienced professionals. Furthermore,
consumer-level cybersecurity software uses a reactive approach. They cover workstations from being
infected with viruses or other malware that attack through websites. This is a defensive force that guards
against attacks that are already working against the user. On the other hand, enterprise-level
cybersecurity software works proactively. It can protect firms from website attacks just like consumer-
level security systems do, however the enterprise-level security also actively protects the firm from
potential threats before they manifest. Moreover, the two types of cybersecurity software also require
different levels of maintenance and expertise to manage. Since cybersecurity threats are constantly
evolving, solutions must always update to thoroughly protect the firm.
7 Exclusive Group controls the Networks Unlimited Group by virtue of a recent acquisition approved by
the Commission on 14 September 2021 (Commission Case Number: 2021JUL0041).
8 The Commission calculated this value by assessing the total revenue for the market for enterprise
cybersecurity software is and of the total market Mimecast accounts for
Converting the into Rands, it is approximately R This amount forms part of
the total revenue for Mimecast in South Africa.
9 The market shares are based on the Commission’s calculations in the previous matter between
Exclusive Networks and Network Limited, Case no. 2021Jul0041.
cybersecurity software services ( % market share
The Commission calculated this value by assessing the total revenue for the market for enterprise
cybersecurity software is and of the total market Mimecast accounts for
Converting the into Rands, it is approximately R This amount forms part of
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[14] As set out in the evidence above, the proposed transaction is unlikely to give rise to a
substantial lessening of competition as a result of vertical effects.
Public Interest Assessment
[15] The Acquiring Group has no employees in South Africa. The Target Group’s
employees are represented by an employee representative, who did not raise
concerns. The merging parties confirmed that no retrenchments were contemplated
as a result of the proposed transaction.
[16] Neither the Acquiring nor Target Group are held by historically disadvantaged persons
(“HDPs”); however, the Target Group contributes to multiple B-BBEE initiatives
regarding (i) skills development; (ii) supplier development; (iii) enterprise development;
and (iv) socio-economic development (also called corporate social responsibility).
[17] The Commission engaged the merging parties on a condition to maintain these
initiatives going forward. The merging parties agreed to a condition that the B-BBEE
initiatives that the Target Group contributes towards, should continue post-merger for
period of at least
[18] We approve the proposed transaction subject to the following set of conditions:
18.1. For a period of at least years following the Implementation Date,
the Merging Parties will ensure that the Target Group will continue to
contribute (at a minimum) to the following initiatives per annum:
18.1.1. Skills development:
18.1.1.1. External bursaries to underprivileged individuals (including
stipends) in the amount of, no less than,
18.1.1.2. External bursaries for students with disabilities in the
amount of, no less than,
18.1.1.3. Training (including bursaries) for RSA Mimecasters in the
amount of, no less than,
18.1.1.4. Youth Employment Services (YES) programme in the
amount of, no less than,
18.1.1.5. Partners for Possibilities (mentoring programme) in the
amount of, no less than, and
18.1.2. Supplier Development in the amount of, no less than,
18.1.3. Enterprise Development in the amount of, no less than,
and
18.1.3. Enterprise Development in the amount of, no less than,
and
18.1.4. Socio-Economic Development in the amount of, no less than,
amount of, no less than,
amount of, no less than,
18.1.1.4. Youth Employment Services (YES) programme in the
amount of, no less than,
amount of, no less than, and
18.1.4. Socio-Economic Development in the amount of, no less than,
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Conclusion
[19] We conclude that, on the basis of the above evidence, the proposed transaction is
unlikely to substantially prevent or lessen competition. We believe that the proposed
transaction, looked at alongside the conditions imposed will have a positive impact on
the public interest.
[20] The proposed transaction is approved subject to the abovementioned public interest
conditions. The full set of conditions is annexed hereto as Annexure “A”
11 May 2022
Professor Liberty Mncube Date
Ms Mondo Mazwai and Professor Imraan I. Valodia concurring
Tribunal Case Manager: Mpumelelo Tshabalala
For the Merging Parties: Wade Graaff, Jocelyn Katz and Keabetswe Magano
For the Commission: Rethabile Ncheche, Ratshidaho Maphwanya and Tamara
Paremoer