Authority blocks IBM’s merger plan

THE State competition watchdog has blocked a takeover deal for the first time, throwing out plans by computing giant IBM to merge its specialist disaster recovery business with another major player in the Irish market.

The Competition Authority said yesterday that IBM’s proposed takeover of Schlumberger Business Continuity Services would “substantially lessen” the market for recovery hotsite services, which allow businesses to continue operating from an offsite location if their offices are destroyed or their computer systems stop working.

The deal was originally flagged in April and was part of a global takeover by IBM of Schlumberger’s business continuity operations. Schlumberger is the biggest provider of such services in Ireland, with seven working sites in Dublin, Cork and Belfast. IBM holds the number two position in Ireland with two sites in Dublin and one in Cork.

Each site contains space for key staff of disrupted businesses to carry out critical work, as well as a limited number of computers that contain backed-up information and allow businesses to get back on their feet until operations can be restored as normal.

The authority blocked the deal because the combined IBM/Schlumberger operation would hold more than 80% market share. “The authority concluded that those companies who are most dependent on business recovery services would not have sufficient alternatives post-merger and would have no choice but to bear a price increase,” said authority chairman John Fingleton. The market for disaster recovery services is estimated to be worth up to €20 million per year.

The authority’s decision will have little effect on the global merger but is likely to require the companies to agree to sell off part of the combined Irish business to cut its market dominance.