Affected market: Software services to local authorities
The OFT's decision on reference under section 33(1) given on 27 October
2008. Full text of decision published 3 November 2008.
Please note that square brackets indicate figures or text which have
been deleted or replaced at the request of the parties for reasons of
Northgate Information Solutions UK Limited** (Northgate) is a private
limited company active in the provision of software, outsourcing and
information technology (IT) services to the human resources, local
government, education and public safety sectors. It is active primarily
in the UK, but also in other countries including the United States,
Ireland, Australia, New Zealand, China and Singapore. Northgate's UK
turnover for the year ended 30 April 2007 was around £342 million.
Anite Public Sector Holdings Limited** (Anite) is a wholly owned
subsidiary of Anite plc which is listed on the London Stock Exchange and
provides a comprehensive range of business-critical IT solutions to
public and private sector organisations. The vast majority of Anite's
sales are achieved in the UK. Anite's turnover for the year ended 30
April 2008 was around £62 million.
By virtue of a share purchase
agreement signed on 31 July 2008, Northgate has agreed to acquire 100
per cent of the issued share capital of Anite from Anite Systems
Holdings Limited, a wholly owned subsidiary of Anite plc, for a cash
consideration of £54,333,000 (subject to any adjustment required to
reflect the net assets and working capital of Anite Public Sector
Holdings Limited and its subsidiaries). The parties notified their
transaction to the OFT by way of an informal submission on 1 August
2008. The administrative deadline expired on 29 September 2008. The
parties submit that the transaction will enable Northgate to expand its
product portfolio and strengthen its offering in a number of non overlap
areas such as social care and document management applications.
As a result of this transaction Northgate and Anite will cease to be
distinct. The parties overlap in the supply of software and related
services to Local Authorities for revenues and benefits applications in
the UK, where their combined share of supply is above 25 per cent and
therefore the share of supply test in section 23 of the Enterprise Act
2002 ('the Act') is met. The OFT therefore believes that it is or may
be the case that arrangements are in progress or in contemplation which,
if carried into effect, will result in the creation of a relevant merger
Both parties are active in the provision of IT solutions to Local
Authorities and housing organisations. The OFT considers the impact of
the transaction on the basis of the narrowest frames of reference,
namely separately on (i) the provision of software and related services
to Local authorities for R&B applications, (ii) the provision of
software and related services to Local Authorities and housing
organisations for SH applications and (iii) the provision of secure
information solution to the criminal justice sector (CJ).
Considering unilateral effects in relation to the provision of R&B
applications, bidding data indicate that Anite does not operate as a key
competitor in the market. Having assessed the competitive interaction
existing between Northgate and Anite, and taking into account Anite's
position in the market going forward, the OFT believes that Anite does
not place a significant competitive constraint on Northgate and is
unlikely to do so in the future. Accordingly, no realistic prospect of
substantial lessening of competition arises as a result of unilateral
effect concerns in the R&B market.
The OFT also concludes that the contemplated merger will not increase
the likelihood of coordinated behaviour on the R&B market on the
basis that Anite's impact (given it's failure to win new business) on
any potential coordinated behaviour in the rest of the market is likely
to be extremely limited.
In relation to SH applications, the OFT finds that the competitive
constraint placed by each of the parties on the other is weak relative
to the number and the strength of remaining players in the market. In
addition, the OFT is satisfied that sufficient alternative players to
the merged entity will remain in the market in order to ensure that any
tendering process stays competitive post-merger. Accordingly, no
unilateral effect concerns arise as a result of the transaction in
relation to the supply of SH applications. The OFT also concludes that
no coordinated effect concern arises in relation to SH applications
given a large number of players in the market, and an increased
asymmetry in competitors' market shares as a result of the merger.
Finally the OFT finds that no concerns arise in relation to the supply
of secure information solutions to CJ. The OFT takes the view that the
parties are not close competitors in relation to the supply of CJ and
that a sufficient number of players will remain post-merger. The
substantial degree of product and supplier differentiation as well as
the relatively large number of potential suppliers in this market leads
to dismissing coordinated effect concerns potentially arising as a
result of the merger.
This merger will therefore not be referred to the Competition Commission
under section 33(1) of the Act.