CONFIDENTIAL — CONTAINS BUSINESS SECRETS
March 1, 2024
RESPONSE TO CMA SUPPLEMENTAL INFORMATION REQUEST
Case No. ME/7184/24
Anticipated Acquisition by Solara Digital Infrastructure Fund VI LP of Cloudium Technologies plc
Submitted by:
Calderwood & Harkness LLP Elaine Forsythe, Specialist Partner, Antitrust & Competition 1601 K Street NW Washington, DC 20006 United States
London Office: One Bartholomew Close, London EC1A 7BL, United Kingdom
In coordination with:
Albright & Kerr LLP Fiona McAllister, Lead Partner, UK Competition 5 New Street Square London EC4A 3TW United Kingdom
On behalf of:
Solara Digital Infrastructure Fund VI LP (the "Acquirer" or "Notifying Party"), a Delaware limited partnership, acting through its general partner Solara Fund VI GP LLC; principal office at 1200 Market Street, Suite 3400, Wilmington, DE 19801, United States
Financial Advisor:
Osprey Bancroft & Co. Damien Harlow, Managing Director, Technology M&A 280 Park Avenue New York, NY 10017 United States
Calderwood & Harkness LLP Matter No. 1041-00003
TABLE OF CONTENTS
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1. Introduction and Procedural Background
1.1 Identification of the Merger
This response is submitted in connection with the anticipated acquisition by Solara Digital Infrastructure Fund VI LP ("Fund VI") of the entire issued and to be issued share capital of Cloudium Technologies plc ("Cloudium") (together, the "Parties," and the transaction, the "Transaction" or the "Merger"). The Transaction is the subject of a Merger Notice Form submitted to the Competition and Markets Authority (the "CMA") on February 12, 2024, pursuant to Part 3 of the Enterprise Act 2002 (the "Act"). The CMA has assigned Case No. ME/7184/24 to this matter.
Fund VI is the sixth flagship investing fund of Solara Digital Infrastructure LP ("Solara" or "SDILP"), a Delaware-based private equity sponsor focused on digital infrastructure and enterprise software assets. Solara manages approximately $38 billion in assets under management ("AUM") across six flagship funds. Fund VI is a 2022 vintage fund with $12.4 billion in committed capital from a diversified base of institutional limited partners, including public pension funds, sovereign wealth funds, university endowments, and insurance companies. The general partner of Fund VI is Solara Fund VI GP LLC, a Delaware limited liability company.
The Transaction was signed on January 22, 2024, pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among Fund VI, Stratos Merger Sub Inc. ("Merger Sub"), a Delaware corporation and wholly owned subsidiary of Fund VI incorporated on January 8, 2024 for the sole purpose of effectuating the Merger, and Cloudium. The Transaction was publicly announced on January 23, 2024. The Merger Agreement provides for a reverse triangular merger under the Delaware General Corporation Law, whereby Merger Sub will merge with and into Cloudium, with Cloudium surviving as a wholly owned subsidiary of Fund VI. Upon consummation, Cloudium's shares will be delisted from the Nasdaq Global Select Market and Cloudium will operate as a privately held company.
The aggregate deal value is $6,800,000,000 (six billion eight hundred million United States dollars), representing approximately $36.92 per share for the 184,200,000 shares of Cloudium common stock outstanding as of the record date, payable in cash. The per-share consideration represents a premium of approximately 32% to Cloudium's unaffected closing share price on January 19, 2024, and a premium of approximately 28% to the volume-weighted average share price for the 30-day period ending January 19, 2024. The Transaction is subject to customary closing conditions, including regulatory approvals in the United Kingdom, the United States (under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended), the European Union (under the EU Merger Regulation), and Germany (under the Act against Restraints of Competition).
1.2 Purpose of This Response
This response (the "Response") is submitted on behalf of the Notifying Party in response to the CMA's supplemental information request dated February 19, 2024 (the "Information Request"), issued by the CMA's Mergers intelligence Branch in connection with its Phase 1 review of the Transaction. The Information Request sought additional data and analysis regarding overlapping product markets in UK cloud-based enterprise resource planning ("cloud ERP") and related software markets, including cloud-based customer-relationship management ("cloud CRM") and cloud-based business intelligence and data analytics ("cloud BI") software.
Specifically, the Information Request asked the Notifying Party to provide:
(a) updated and detailed market share estimates for the Parties and their principal competitors in each of cloud ERP, cloud CRM, and cloud BI in the United Kingdom;
(b) the Notifying Party's views on the appropriate product market definition and segmentation, including whether separate markets should be defined by customer size (mid-market versus enterprise), deployment model (cloud-native versus on-premises/hybrid), or industry vertical;
(c) a detailed description of any vertical or conglomerate relationships between Cloudium and any existing Solara portfolio company with activities in the United Kingdom;
(d) information on barriers to entry and expansion in UK cloud ERP and related software markets; and
(e) information on the Notifying Party's commercial rationale for the Transaction and any anticipated efficiencies or customer benefits.
This Response has been prepared by Calderwood & Harkness LLP (buyer's US and international counsel) in coordination with Albright & Kerr LLP (buyer's UK regulatory counsel), with input from Solara's financial advisor, Osprey Bancroft & Co. (Damien Harlow, Managing Director, Technology M&A). The legal teams have conducted extensive diligence on the Parties' activities in the United Kingdom and have obtained the factual information set out below from the management teams of Solara and Cloudium, as well as from publicly available industry sources.
The Notifying Party confirms that all information provided in this Response is accurate and complete to the best of its knowledge, information, and belief, having made all reasonable enquiries. Where information is based on estimates or third-party sources, this is clearly indicated, and the Notifying Party has taken reasonable steps to verify the accuracy of such information.
1.3 Confidentiality Designation
Certain data contained in this Response constitutes confidential business information within the meaning of Section 244 of the Act. Information designated as confidential is enclosed in square brackets and highlighted in the body of this Response and its Annexes. Such information includes, without limitation, specific revenue figures, customer counts, market share estimates, contract terms, and internal strategic analyses of the Parties. A redacted, non-confidential version of this Response is available for inclusion in the CMA's public file upon request.
The Notifying Party respectfully requests that the CMA treat all information so designated as confidential and that it not be disclosed to any third party, whether in the CMA's published decision, in correspondence with third parties, or otherwise, without the prior written consent of the Notifying Party. To the extent the CMA considers it necessary to disclose any such information, the Notifying Party requests the opportunity to make representations before any disclosure is made.
2. Description of the Parties and Their Activities in the UK
2.1 The Acquirer: Solara Digital Infrastructure LP / Fund VI
Solara Digital Infrastructure LP is a Delaware limited partnership formed in 2009. Its general partner is Solara Digital GP LLC, also a Delaware limited liability company. Solara's principal offices are located at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801, with additional offices in New York (450 Lexington Avenue, 38th Floor, New York, NY 10017), San Francisco, and London (at serviced office space at 25 Moorgate, London EC2R 6AY, used by the Solara deal team for European transactions).
Solara was founded in 2009 by Marcus Elliston (Founder & Managing Partner) and is today co-led by Mr. Elliston and Priya Narasimhan (Co-Managing Partner & Chief Investment Officer). The firm employs approximately 180 investment professionals across its offices and manages approximately $38 billion in AUM across six flagship funds and several co-investment vehicles. Solara's investment strategy is focused on digital infrastructure and enterprise software assets in North America, Europe, and selected Asia-Pacific markets. Solara's core investment themes include enterprise software and SaaS platforms, cloud infrastructure and managed services, data analytics and artificial intelligence, and cybersecurity.
Fund VI (Solara Digital Infrastructure Fund VI LP) is the investing entity for the Transaction. Fund VI's general partner is Solara Fund VI GP LLC. Fund VI held its final close on September 15, 2022, with $12.4 billion in committed capital. As of the date of this Response, Fund VI has deployed approximately $7.2 billion across six platform investments, of which the Transaction (at $6.8 billion enterprise value, to be funded through a combination of equity from Fund VI and co-investors and committed debt financing) will be the largest.
Across Funds IV, V, and VI, Solara has completed 14 platform investments. A comprehensive list of these investments, together with a description of each portfolio company's business and an assessment of its UK activities, is set out in Annex 4 to this Response. As described in greater detail in Section 5.5 below, none of Solara's existing portfolio companies generates material revenues in the United Kingdom in the specific product markets under review (cloud ERP, cloud CRM, or cloud BI). The Notifying Party therefore submits that the Transaction gives rise to no horizontal overlap in any relevant UK product market.
For completeness, the Notifying Party notes the following with respect to Solara's existing portfolio companies and their UK activities:
(a) NovaBridge Software Inc. (Fund V; acquired 2020): a provider of cloud-based project management and collaboration tools for the construction and engineering sectors. NovaBridge generates approximately $4.2 million in annual UK revenues. NovaBridge's project management tools are a distinct product category from cloud ERP, cloud CRM, and cloud BI solutions, and NovaBridge does not compete with Cloudium in any relevant market.
(b) CipherGrid Technologies LLC (Fund V; acquired 2021): a provider of network security and identity management solutions. CipherGrid generates approximately $6.8 million in annual UK revenues. CipherGrid's cybersecurity offerings are not substitutable for, and do not compete with, Cloudium's cloud ERP, CRM, or BI products.
(c) Meridian DataOps Inc. (Fund VI; acquired 2023): a provider of data pipeline orchestration and DevOps tooling for data engineering teams. Meridian DataOps generates approximately $1.9 million in annual UK revenues. While Meridian DataOps operates in the broader data and analytics ecosystem, its data pipeline orchestration tools are a distinct product category from Cloudium's cloud BI and analytics platform. Meridian DataOps does not offer BI dashboards, data visualization, or reporting functionality and does not compete with Cloudium for BI customers.
No other Solara portfolio company has any UK revenue or operations relevant to the product markets under review. The Notifying Party confirms that, based on a thorough review of all 14 platform investments across Funds IV through VI, there is no meaningful competitive overlap with Cloudium's UK activities.
2.2 The Target: Cloudium Technologies plc
Cloudium Technologies plc is a public limited company incorporated under the laws of England and Wales (Company No. 09734521), with its registered office at 45 Broadwick Street, London W1F 0DB, United Kingdom. Cloudium's US headquarters are located at 600 Townsend Street, Suite 800, San Francisco, California 94103. Cloudium's shares are listed on the Nasdaq Global Select Market under the ticker symbol "CLDM."
Cloudium was founded in 2014 in London by Jonathan Hargrove (who serves as Chief Executive Officer) and two co-founders, initially as a cloud-native ERP solution for mid-market companies. Since its founding, Cloudium has expanded its product portfolio to encompass three core product lines: (i) cloud-native enterprise resource planning ("Cloudium ERP"), (ii) cloud-based customer-relationship management ("Cloudium CRM"), and (iii) cloud-based business intelligence and data analytics ("Cloudium Analytics"). Cloudium serves mid-market and enterprise customers globally across a range of industry verticals, including financial services, professional services, healthcare, retail, manufacturing, and technology.
Cloudium's senior management team includes:
• Jonathan Hargrove — Chief Executive Officer and Co-Founder
• Sienna Whitfield — Chief Financial Officer
• Nadia Chowdhury — General Counsel and Company Secretary
• Douglas Pemberton — Non-Executive Chairman of the Board of Directors
• Raj Krishnamurthy — Chief Technology Officer
• Laura Hennessy — Chief Revenue Officer
As of the last twelve months ("LTM") ending on the fiscal year ended September 30, 2023 ("FYE 2023"), Cloudium reported consolidated revenues of $1,620,000,000 and EBITDA of $405,000,000, representing an EBITDA margin of approximately 25%. Cloudium's annualized recurring revenue ("ARR") as of December 31, 2023 was $1,740,000,000, reflecting continued growth in subscription-based revenues. As of the date of this Response, Cloudium employs approximately 6,800 individuals globally, distributed across the United States (approximately 2,800 employees), the United Kingdom (approximately 1,200 employees), India (approximately 2,400 employees), and Germany (approximately 400 employees).
2.3 Cloudium's UK Operations
Cloudium's UK business is conducted through Cloudium Technologies UK Ltd. (Company No. 11287456), a private limited company registered at 45 Broadwick Street, London W1F 0DB, and a wholly owned subsidiary of Cloudium Technologies plc. Cloudium Technologies UK Ltd. was incorporated in 2018 following a corporate restructuring that established the UK subsidiary as the primary operating entity for Cloudium's UK and, in part, broader EMEA activities.
Cloudium Technologies UK Ltd. employs approximately 1,200 individuals across offices in London (Broadwick Street, Soho) and Manchester (Spinningfields). The London office serves as the primary UK and EMEA commercial headquarters, housing sales, marketing, customer success, professional services, and a portion of the company's product development and engineering teams. The Manchester office houses additional customer success, professional services, and engineering personnel.
For FYE 2023, Cloudium Technologies UK Ltd. generated revenues of £312,000,000 (approximately $390,000,000 at an exchange rate of $1.25/£1.00). This figure represents Cloudium's total UK-attributed revenues, including software subscription fees, professional services, and related revenue streams generated from customers domiciled in the United Kingdom or with UK-based deployments.
The products offered by Cloudium in the UK comprise the full suite of Cloudium's cloud-native SaaS solutions:
(a) Cloudium ERP — a comprehensive cloud-native enterprise resource planning platform encompassing financial management, supply chain management, procurement, human capital management, and related operational modules. Cloudium ERP is Cloudium's largest product line and the original core of its business. Cloudium ERP is sold on a per-user, per-month subscription basis, with tiered pricing based on module selection and customer size.
(b) Cloudium CRM — a cloud-based customer-relationship management platform including sales force automation, marketing automation, customer service and support, and analytics. Cloudium CRM was launched in 2018 and has grown to become a meaningful, though smaller, contributor to UK revenues.
(c) Cloudium Analytics — a cloud-based business intelligence, data visualization, reporting, and advanced analytics platform. Cloudium Analytics integrates natively with Cloudium ERP and Cloudium CRM but is also sold as a standalone product to customers who may use third-party ERP or CRM systems.
A detailed, confidential breakdown of Cloudium Technologies UK Ltd.'s £312,000,000 revenue by product segment is provided in Annex 5 to this Response. At a summary level, the approximate breakdown is as follows:
[CONFIDENTIAL]
2.4 Other Key Subsidiaries (Non-UK)
For completeness, the Notifying Party notes the following principal non-UK subsidiaries of Cloudium:
(a) Cloudium Technologies India Pvt. Ltd., incorporated under the laws of India with registered office in Bangalore, Karnataka. This entity employs approximately 2,400 individuals, primarily in research and development, quality assurance, and customer support functions. It serves as Cloudium's principal engineering and product development hub.
(b) Cloudium Solutions GmbH, incorporated under the laws of Germany with registered office in Berlin. This entity employs approximately 400 individuals and is responsible for sales, customer success, and professional services in the DACH region (Germany, Austria, and Switzerland). Cloudium Solutions GmbH generated revenues of approximately €78 million for FYE 2023.
Neither of these entities is the subject of the present CMA review, but they are noted here for the sake of providing the CMA with a complete picture of Cloudium's global corporate structure and operations.
3. Product Market Definition
3.1 CMA's Questions on Product Market Overlap
The Information Request invited the Notifying Party to provide data and analysis on the Parties' overlapping activities, if any, in the following product categories in the United Kingdom:
(a) cloud ERP software;
(b) cloud CRM software; and
(c) cloud BI / data analytics software.
The CMA also requested the Notifying Party's views on the appropriate segmentation of these product markets. In particular, the CMA asked whether it would be appropriate to segment the relevant product markets by:
(i) customer size — distinguishing between solutions aimed at mid-market customers (typically defined as organisations with between 100 and 2,500 employees or annual revenues between £10 million and £500 million) and solutions aimed at enterprise customers (organisations with more than 2,500 employees or annual revenues exceeding £500 million);
(ii) deployment model — distinguishing between cloud-native solutions (designed from inception for cloud delivery and multi-tenant architectures), cloud-hosted solutions (legacy on-premises products re-engineered or hosted in the cloud), and traditional on-premises/hybrid deployments; and
(iii) industry vertical — distinguishing between solutions designed for specific industry verticals (e.g., financial services, healthcare, manufacturing, retail) and general-purpose, cross-industry solutions.
The Notifying Party addresses each of these product market questions below.
3.2 The Notifying Party's Proposed Product Market Definitions
The Notifying Party submits that the relevant product markets for the purposes of this assessment are:
Cloud ERP Software. This market comprises cloud-native or cloud-deployed enterprise resource planning solutions encompassing financial management, supply chain management, human capital management, procurement, and related operational modules. The Notifying Party submits that this market should be defined to include all cloud ERP solutions — whether cloud-native (i.e., designed from inception for multi-tenant cloud deployment) or cloud-hosted (i.e., traditional on-premises solutions that have been re-engineered or migrated to cloud delivery) — as both categories of product compete for the same customer demand. The Notifying Party submits, however, that legacy on-premises ERP systems deployed on traditional perpetual-licence, server-based architectures should be excluded from the relevant product market, as these products are increasingly viewed by customers as a distinct and declining category. Customer procurement decisions in 2023 and 2024 are overwhelmingly oriented toward cloud-delivered solutions, and the competitive dynamics of the cloud ERP segment differ materially from those of the legacy on-premises segment. The CMA's prior decisional practice is consistent with this approach; for example, in its assessment of the anticipated merger of Pinnacle Software Group and Stratton Cloud Holdings (Case No. ME/6912/22, decided September 14, 2022), the CMA considered cloud-deployed ERP solutions as a distinct product market from legacy on-premises ERP.
Cloud CRM Software. This market comprises cloud-based customer-relationship management platforms, including sales force automation, marketing automation, customer service and support, and associated analytics. Cloud CRM is a well-established product category with clearly defined competitive dynamics and a set of specialist vendors. The Notifying Party submits that cloud CRM constitutes a distinct product market from cloud ERP, notwithstanding the fact that some vendors (including Cloudium) offer both cloud ERP and cloud CRM as part of an integrated product suite.
Cloud BI / Analytics Software. This market comprises cloud-based business intelligence, data visualization, reporting, and advanced analytics platforms. Cloud BI platforms enable users to query, analyze, and visualize data from multiple sources, including ERP and CRM systems, for business decision-making. The Notifying Party submits that cloud BI constitutes a distinct product market. While there is a growing trend among enterprise application vendors to embed analytics functionality within their ERP and CRM products, standalone cloud BI platforms continue to compete for customer spend as a separate product category, and customers frequently procure cloud BI solutions from a provider different from their ERP or CRM vendor.
The Notifying Party acknowledges the growing convergence of ERP, CRM, and BI functionality within integrated "enterprise application suites." Several major vendors now market comprehensive platforms that span all three categories. However, for the purposes of competitive analysis, the Notifying Party submits that the narrower, three-market segmentation described above remains the most appropriate framework. This approach is consistent with how customers procure these solutions (often through distinct evaluation and procurement processes for each category), how vendors position and price their products, and how industry analysts define and measure these markets.
Segmentation by Customer Size. With respect to whether mid-market and enterprise segments constitute separate product markets, the Notifying Party submits that competitive conditions are broadly similar across both segments. The same vendors typically compete for both mid-market and enterprise customers, with product differentiation occurring primarily through tiering, module selection, and pricing rather than through fundamentally distinct products. Procurement processes in both segments involve competitive evaluations and requests for proposals. The Notifying Party therefore submits that a single product market encompassing both mid-market and enterprise customers is the most appropriate frame of reference. However, in the interest of assisting the CMA's assessment, the Notifying Party is prepared to provide market share data under both a single-market and a segmented (mid-market / enterprise) approach if requested.
Segmentation by Deployment Model. As noted above, the Notifying Party submits that the relevant market should encompass all cloud-delivered solutions (both cloud-native and cloud-hosted) but should exclude legacy on-premises deployments. The Notifying Party does not consider it necessary or appropriate to further sub-segment the market between cloud-native and cloud-hosted solutions, as customers generally view these as substitutable and vendors compete across both delivery models.
Segmentation by Industry Vertical. The Notifying Party submits that industry vertical segmentation is not necessary for the purposes of this assessment. While certain vendors may have particular strengths in specific verticals, the major cloud ERP, CRM, and BI vendors serve customers across multiple verticals and compete with each other across the full range of industry sectors. Cloudium's UK customer base spans financial services, professional services, healthcare, retail, manufacturing, and technology, and Cloudium competes with the same set of principal competitors in each of these verticals.
3.3 Supply-Side and Demand-Side Substitutability
From the demand side, customers of cloud ERP, CRM, and BI solutions in the UK consider all leading cloud providers as potential substitutes, regardless of the provider's country of headquarters or incorporation. UK customers routinely evaluate and procure solutions from vendors headquartered in the United States, the United Kingdom, continental Europe, and elsewhere. The procurement process for cloud enterprise software typically involves a structured request-for-proposal ("RFP") process in which multiple vendors are invited to participate, and selection decisions are based on functionality, price, implementation timeline, customer references, and vendor viability. While switching costs for cloud ERP solutions can be material (due to the need for data migration, reconfiguration of business processes, and retraining of users), the evidence suggests that switching costs are declining over time as cloud-native architectures, standardised APIs, and specialist migration tools reduce the friction associated with vendor transitions. In any event, the existence of switching costs does not vitiate the competitive constraint exercised by alternative suppliers, particularly at the point of initial procurement or contract renewal.
From the supply side, multiple global and regional competitors are active across all three product categories in the UK. The major vendors have the technical capability, financial resources, and go-to-market infrastructure to serve UK customers across cloud ERP, CRM, and BI. Barriers to entry, while not negligible, are moderate: significant R&D investment is required to develop a competitive enterprise software platform, but the shift to cloud delivery models has substantially lowered infrastructure barriers compared to the legacy on-premises era. New entrants and expanding competitors can leverage hyperscale cloud infrastructure providers (such as public cloud platforms) to deploy and scale their offerings without the need for proprietary data center investments. Furthermore, the availability of open-source technologies, composable architectures, and platform-as-a-service development tools has reduced the time and cost required to build and launch competitive cloud software products.
4. Geographic Market Definition
4.1 The Notifying Party's Proposed Geographic Market
The Notifying Party submits that the relevant geographic market for each of cloud ERP, cloud CRM, and cloud BI software is at least EEA-wide, and more likely global, in scope.
Cloud-based enterprise software is, by its nature, delivered remotely over the internet to customers regardless of their physical location. The same software platforms are sold to customers around the world, with global product development and localised sales, marketing, and customer support functions. The principal competitive dynamics — including product functionality, pricing, vendor selection processes, and the identity of the major competitors — are substantially similar across the United Kingdom, continental Europe, and North America.
In the alternative, and recognising that the CMA may wish to assess competitive effects within a UK-specific frame of reference, the Notifying Party has prepared its competitive analysis with reference to both a global/EEA-wide market and a UK-specific market. As set out in Section 5 below, the Transaction does not give rise to competition concerns under either geographic market definition.
4.2 Factors Supporting a Broader-Than-UK Market
The Notifying Party highlights the following factors in support of a broader geographic market definition:
(a) Global product platforms. Cloud ERP, CRM, and BI software is developed and maintained on a global basis. The same product codebases, feature sets, and platform architectures serve customers in the UK, continental Europe, North America, and other regions. While vendors may offer localised configurations (e.g., UK tax compliance, UK payroll, UK regulatory reporting), these are typically add-on modules or configurable settings within a single global product rather than fundamentally distinct products.
(b) Cross-border procurement. UK customers regularly procure cloud enterprise software from vendors headquartered outside the UK. The vast majority of the leading cloud ERP, CRM, and BI vendors are headquartered in the United States, and UK customers evaluate these vendors alongside UK- and European-headquartered competitors without geographic preference.
(c) Pricing consistency. While prices may be denominated in local currency and may vary to some extent based on regional competitive conditions, the pricing structures and list prices of the major cloud software vendors are substantially consistent across geographies. There is no evidence of material geographic price discrimination that would support the delineation of a separate UK market.
(d) CMA precedent. The CMA has previously recognised that software markets are likely to be at least EEA-wide in geographic scope. In its Phase 1 decision in Case No. ME/6912/22 (Pinnacle/Stratton), the CMA assessed the relevant geographic market for cloud ERP software as global, while noting that its competitive assessment would focus on the UK. Similarly, in its Phase 2 inquiry into the completed acquisition of Ashford Data Systems by Colton Technologies Group (Case No. ME/6748/21, final report published July 8, 2022), the CMA assessed the geographic market for data analytics software on an at-least-EEA-wide basis.
Notwithstanding the above, the Notifying Party has prepared its market share estimates and competitive analysis with reference to the UK as a separate geographic market, in order to provide the CMA with the most relevant data for its Phase 1 assessment.
5. Competitive Assessment: Market Shares and Concentration
5.1 Methodology
The market share estimates presented in this Section and in Annexes 1 through 3 are based on the following sources:
(a) Third-party industry analyst reports. The Notifying Party has relied on published market sizing and market share data from Keystone Research Associates ("KRA"), a leading enterprise software industry analyst firm, and from Whitmore intelligence Group ("WIG"), a specialist cloud computing market research firm. Relevant excerpts from these reports are included in Annex 6.
(b) Cloudium's internal estimates. Cloudium's strategic planning and competitive intelligence teams maintain internal estimates of the UK addressable market size for cloud ERP, cloud CRM, and cloud BI, as well as estimates of key competitors' market positions. These internal estimates have been cross-referenced against the third-party analyst reports referenced above.
(c) Publicly available financial data. Where competitors are publicly listed companies, the Notifying Party has used publicly reported revenue data (adjusted for estimated UK-specific revenues where global figures are reported) to validate market share estimates.
(d) Osprey Bancroft & Co. analysis. Solara's financial advisor, Osprey Bancroft & Co., has prepared a market sizing and competitive landscape analysis as part of its investment due diligence for the Transaction. This analysis has been used as a supplementary source.
Revenue-based market shares are presented as the primary metric throughout this Response, as revenue is the most widely used and reliable indicator of market position in enterprise software markets. ARR-based and customer-count-based market shares are presented as supplementary metrics in the Annexes.
The Notifying Party acknowledges that market share estimates in enterprise software markets are inherently subject to a degree of uncertainty, as not all competitors publicly disclose their UK-specific revenues and market sizing methodologies vary across analyst firms. The Notifying Party has endeavoured to present the most accurate estimates available and has erred on the side of conservatism (i.e., presenting estimates that may slightly overstate Cloudium's market share) in order to provide the CMA with a robust factual basis for its assessment.
5.2 Cloud ERP — UK Market Shares
The Notifying Party estimates that the total UK cloud ERP market was approximately £3.12 billion in revenue for FYE 2023, based on the KRA and WIG market sizing reports referenced above and in Annex 6. This figure encompasses all cloud-deployed (cloud-native and cloud-hosted) ERP solutions sold to UK customers, including subscription fees, implementation and configuration revenues directly tied to cloud ERP deployments, and ongoing support and maintenance revenues.
Based on Cloudium Technologies UK Ltd.'s cloud ERP revenue of approximately [£187.2 million] for FYE 2023 (as set out in the confidential product line breakdown in Annex 5), Cloudium's estimated share of the UK cloud ERP market is approximately [6.0%].
[CONFIDENTIAL]
The Notifying Party notes that Cloudium's total UK revenue of £312 million includes revenues from cloud CRM, cloud BI, and professional services in addition to cloud ERP. Only the cloud ERP component — approximately [£187.2 million] — is relevant for market share calculations in the cloud ERP market.
Solara portfolio companies' UK cloud ERP revenue: As set out in Section 2.1 and Annex 4, no Solara portfolio company generates material UK revenues in cloud ERP. Accordingly, the combined post-Transaction share of supply in UK cloud ERP is essentially equal to Cloudium's standalone share of approximately [6.0%], with no meaningful competitive increment attributable to the Transaction.
The UK cloud ERP market is served by numerous credible competitors, including several vendors with market positions substantially larger than Cloudium's. The Notifying Party's estimates of the market shares of the principal competitors are set out in the table below and in greater detail in Annex 1:
[CONFIDENTIAL — estimates based on KRA, WIG, and Cloudium internal data]
As the table above demonstrates, the UK cloud ERP market is highly fragmented, with at least five competitors having market shares equal to or greater than Cloudium's. The market leader, Aurelian Enterprise Systems, holds an estimated [21.0%] share — more than three times Cloudium's share. The top four competitors collectively account for approximately [60%] of the market, leaving substantial competitive space for Cloudium and numerous other vendors.
HHI Analysis. Based on the market share estimates set out above, the pre-merger Herfindahl-Hirschman Index ("HHI") for the UK cloud ERP market is approximately 1,054. The post-merger HHI is approximately 1,054 (unchanged, as there is no meaningful increment from the Transaction). The delta (change in HHI) is negligible — effectively zero. Both the absolute HHI level and the delta are well below the thresholds set out in the CMA's Merger Assessment Guidelines (CMA129, revised 2021) that would ordinarily give rise to prima facie competition concerns. Under the CMA's guidelines, mergers resulting in a post-merger HHI below 1,000 generally do not raise concerns, and mergers resulting in a post-merger HHI between 1,000 and 2,000 with a delta below 250 are also unlikely to raise concerns. The present Transaction falls comfortably within this safe harbour.
5.3 Cloud CRM — UK Market Shares
The Notifying Party estimates that the total UK cloud CRM market was approximately £4.68 billion in revenue for FYE 2023. The UK cloud CRM market is substantially larger than the UK cloud ERP market, reflecting the broader adoption of CRM solutions across businesses of all sizes and the dominance of several well-established global CRM platforms.
Based on Cloudium Technologies UK Ltd.'s cloud CRM revenue of approximately [£59.3 million] for FYE 2023, Cloudium's estimated share of the UK cloud CRM market is approximately [1.3%].
Cloudium's position in cloud CRM is materially smaller than its position in cloud ERP. The UK cloud CRM market is dominated by Apex CRM Solutions, which holds an estimated [32.0%] market share — by far the largest single competitor. Other major competitors include Zenith Business Solutions, Halcyon Software Group, Aurelian Enterprise Systems, and several specialist CRM vendors.
No Solara portfolio company generates any UK revenues in cloud CRM. Accordingly, the Transaction produces no increment in the UK cloud CRM market, and the combined post-Transaction share of supply is equal to Cloudium's standalone share of approximately [1.3%].
Detailed market share estimates for the UK cloud CRM market are set out in Annex 2.
5.4 Cloud BI / Analytics — UK Market Shares
The Notifying Party estimates that the total UK cloud BI / analytics market was approximately £2.34 billion in revenue for FYE 2023. The UK cloud BI market features multiple strong incumbents with well-established platforms, including several vendors whose BI offerings benefit from integration with widely deployed operating systems, productivity suites, and database platforms.
Based on Cloudium Technologies UK Ltd.'s cloud BI / analytics revenue of approximately [£37.4 million] for FYE 2023, Cloudium's estimated share of the UK cloud BI / analytics market is approximately [1.6%].
Cloudium Analytics is a growing but relatively modest participant in the UK cloud BI market. The market leaders — Prism Analytics Group (estimated [22.0%] share) and Tessera Data Insights (estimated [18.0%] share) — hold positions that are an order of magnitude larger than Cloudium's. The market features numerous other credible competitors, including several open-source and specialist analytics platforms that have gained significant traction in recent years.
No Solara portfolio company generates any meaningful UK revenues in cloud BI / analytics. While Meridian DataOps Inc. (a Fund VI portfolio company) operates in the broader data ecosystem, its data pipeline orchestration tools are a distinct product category from cloud BI, as discussed in Section 2.1 above, and Meridian DataOps' UK revenues of approximately $1.9 million would not constitute a material increment even if one were to adopt the broadest possible definition of the cloud BI market.
Detailed market share estimates for the UK cloud BI / analytics market are set out in Annex 3.
5.5 No Horizontal Overlap
The central submission of the Notifying Party on the competitive effects of the Transaction is as follows: the Transaction does not give rise to any horizontal overlap in any relevant UK product market.
This conclusion follows from the fundamental nature of the Transaction. Fund VI is a financial sponsor — a private equity investment vehicle — and not an operating company. Fund VI does not itself supply cloud ERP, cloud CRM, cloud BI, or any other product or service in competition with Cloudium. The only potential source of horizontal overlap would be the activities of Solara's existing portfolio companies. As set out in detail in Section 2.1 and Annex 4, a comprehensive review of all 14 platform investments across Solara's Funds IV, V, and VI confirms that none of these portfolio companies competes with Cloudium in the UK cloud ERP, cloud CRM, or cloud BI markets.
Accordingly, the Transaction does not result in any loss of competition on a horizontal basis. The competitive landscape in each of the relevant UK product markets will remain unchanged following completion of the Transaction. The same number of independent competitors will continue to compete for UK customers, and the competitive dynamics — including the number and identity of viable alternatives available to customers — will be unaffected.
The Notifying Party respectfully submits that, in light of the absence of any horizontal overlap, the Transaction does not give rise to a realistic prospect of a substantial lessening of competition on horizontal grounds.
6. Vertical and Conglomerate Effects Assessment
6.1 Vertical Relationships
The Notifying Party has considered whether any Solara portfolio company operates at a different level of the supply chain from Cloudium in the UK, such that the Transaction could give rise to vertical effects — specifically, input foreclosure or customer foreclosure concerns.
The relevant supply chain for cloud enterprise software encompasses:
(a) upstream inputs — cloud hosting and infrastructure services (IaaS/PaaS), database software, development tools, and component technologies;
(b) midstream — the development and provision of cloud application software (ERP, CRM, BI) by vendors such as Cloudium; and
(c) downstream — systems integration, implementation consulting, managed services, and end-user customers.
The Notifying Party has assessed each of Solara's 14 portfolio companies against this framework and has identified no material vertical relationships with Cloudium's UK business:
(a) No Solara portfolio company is a significant provider of cloud hosting or infrastructure services (IaaS/PaaS) to Cloudium or to Cloudium's competitors. Cloudium's cloud infrastructure is hosted primarily on third-party hyperscale platforms under multi-year agreements, and no Solara portfolio company supplies infrastructure services to Cloudium or has the ability to foreclose Cloudium's competitors from accessing hosting infrastructure.
(b) No Solara portfolio company is a significant provider of systems integration or implementation consulting services for cloud ERP, CRM, or BI deployments in the UK. None of the 14 platform investments operates as a systems integrator or IT consulting firm focused on enterprise application implementation.
(c) No Solara portfolio company is a significant downstream customer of Cloudium. While certain Solara portfolio companies may use cloud ERP, CRM, or BI solutions in the ordinary course of their business, none is a material customer of Cloudium, and in any event, any such customer relationship would not give rise to foreclosure concerns.
The Notifying Party therefore concludes that the Transaction does not give rise to any vertical effects that could result in input foreclosure, customer foreclosure, or any other form of vertical competitive harm in the UK.
6.2 Conglomerate Effects
The Notifying Party has also considered whether the combination of Cloudium's product offerings with those of any Solara portfolio company could give rise to conglomerate effects — in particular, whether the merged entity could engage in exclusionary bundling or tying of complementary products to the detriment of competitors.
Conglomerate effects are most likely to arise where the merging parties' products are complements — that is, products that are frequently purchased together by the same customers — and where the merged entity would have both the ability and the incentive to foreclose competitors by leveraging market power in one product to drive sales of the other.
In the present case, no Solara portfolio company offers products that are complementary to Cloudium's cloud ERP, CRM, or BI solutions in a manner that could give rise to conglomerate concerns:
(a) NovaBridge Software (project management tools for construction and engineering) serves a distinct customer base and product category from Cloudium's enterprise application suite. There is no meaningful complementarity between construction project management tools and cloud ERP, CRM, or BI software.
(b) CipherGrid Technologies (network security and identity management) operates in a product category that, while broadly within the enterprise IT ecosystem, is not complementary to Cloudium's offerings in a competitively significant manner. Customers do not typically bundle cloud ERP and cybersecurity solutions in a single procurement, and there would be no ability or incentive to foreclose competitors through tying or bundling.
(c) Meridian DataOps (data pipeline orchestration) operates in the broader data ecosystem but serves a technically distinct use case (data engineering and DevOps) from Cloudium Analytics (BI dashboards and visualisation for business users). The products address different buyer personas and procurement processes, and there would be no meaningful scope for exclusionary bundling.
The Notifying Party therefore concludes that the Transaction does not give rise to any conglomerate concerns in the UK or in any other jurisdiction.
7. Barriers to Entry and Expansion
7.1 Entry Conditions in UK Cloud ERP
The UK cloud ERP market has demonstrated robust entry and expansion activity in recent years, confirming that barriers to entry and expansion are moderate and that the market is contestable. The Notifying Party highlights the following:
(a) Cloud delivery models have lowered infrastructure barriers. The shift from on-premises to cloud delivery has fundamentally altered the economics of entry into enterprise software markets. New entrants and expanding competitors can leverage hyperscale cloud infrastructure to deploy, scale, and maintain their products without the capital expenditure associated with proprietary data centres. This has reduced the minimum efficient scale for market entry and enabled smaller, more agile competitors to build and launch credible products.
(b) Modular and composable architectures. The trend toward modular, composable enterprise application architectures — in which customers assemble "best-of-breed" solutions from multiple vendors rather than relying on a single monolithic suite — has created additional entry opportunities. New entrants can target specific functional modules (e.g., financial management, procurement, or HR) without needing to develop a full end-to-end ERP suite from inception.
(c) Recent examples of entry and expansion. The UK cloud ERP market has seen several notable instances of entry and expansion in the 2021–2024 period:
(i) Kepler Cloud Systems Ltd., a UK-based start-up founded in 2019, raised £85 million in Series C funding in March 2022 and has since expanded its UK cloud ERP customer base from approximately 120 to over 500 customers, with a focus on mid-market professional services firms.
(ii) Orchard Technologies Inc., a US-based cloud ERP vendor that previously focused on the North American market, established a UK sales office in Manchester in January 2022 and has grown its UK customer base to over 200 customers within two years.
(iii) Whitfield & Drake plc, a UK-based legacy on-premises ERP vendor, completed the migration of its product suite to a cloud-native architecture in 2022 and has since re-entered competitive procurements for UK cloud ERP customers, securing several significant contract wins against incumbent cloud vendors.
These examples demonstrate that the UK cloud ERP market is characterised by ongoing competitive entry and expansion, and that both new entrants and established vendors outside the UK can and do build meaningful positions in the market within a relatively short timeframe.
7.2 Countervailing Buyer Power
UK customers of cloud ERP, CRM, and BI solutions exercise significant countervailing buyer power. The following factors are relevant:
(a) Sophisticated procurement processes. UK enterprise and mid-market customers typically conduct structured, competitive procurement processes involving formal RFPs, product demonstrations, proof-of-concept evaluations, reference checks, and detailed contract negotiations. These processes create genuine competitive tension among vendors and ensure that customers are able to extract competitive pricing and favourable contractual terms.
(b) Multi-vendor strategies. Many UK organisations adopt multi-vendor strategies, procuring ERP, CRM, and BI solutions from different providers. This limits any single vendor's ability to exercise market power over its customers and creates ongoing competitive pressure across product categories.
(c) Contract renewal leverage. Cloud ERP contracts are typically structured as multi-year subscription agreements (commonly three to five years in duration), with periodic renewal opportunities. At each renewal point, customers have the ability — and frequently exercise the willingness — to re-evaluate their vendor relationships and consider alternative providers.
(d) Large customer buying groups. In certain sectors, UK customers participate in buying consortia or framework agreements that aggregate purchasing power across multiple organisations, further strengthening buyer power.
The Notifying Party submits that the combination of competitive market conditions, low barriers to expansion, and significant countervailing buyer power ensures that the Transaction will not result in any diminution of competitive outcomes for UK customers.
8. Third-Party Views
8.1 Customer Feedback
The Notifying Party has not received any negative feedback from Cloudium's UK customers regarding the Transaction. To the contrary, anecdotal feedback received by Cloudium's management team following the public announcement of the Transaction on January 23, 2024 has been generally positive or neutral. Several of Cloudium's major UK customers have expressed a view that Solara's investment will strengthen Cloudium's product development capabilities and financial stability, which they regard as beneficial to the ongoing vendor relationship.
The Notifying Party acknowledges that the CMA may independently gather customer and competitor views through its own information-gathering process, including through the sending of merger intelligence questionnaires to third parties. The Notifying Party is confident that any such feedback will confirm that the Transaction does not raise competition concerns in the UK.
8.2 Competitor Views
The Notifying Party is not aware of any competitor concerns regarding the Transaction. No competitor of Cloudium has, to the Notifying Party's knowledge, made any public statement or private communication suggesting that the Transaction could result in a substantial lessening of competition in the UK or in any other jurisdiction. Given the absence of any horizontal overlap and the modest market positions held by Cloudium in each of the relevant product markets, the Notifying Party does not anticipate that competitors would have a basis on which to raise concerns.
9. Key Customer Contracts and Change of Control
The Notifying Party has been asked to identify and describe any material customer contracts containing change-of-control provisions that may be triggered by the Transaction and that could affect competitive conditions in the UK. The Notifying Party has identified the following contracts:
9.1 Aegis Federal Solutions Inc.
Cloudium is party to a Master SaaS Agreement dated August 14, 2021, with Aegis Federal Solutions Inc. ("Aegis"), a US government contractor headquartered in Arlington, Virginia. The Aegis contract has an ARR of approximately $84,000,000 and is one of Cloudium's largest customer relationships globally. The Aegis contract contains a "change of control" consent provision requiring Cloudium to obtain Aegis's prior written consent before consummating any change of control of Cloudium's direct or indirect parent company.
The Notifying Party notes that the Aegis contract is focused exclusively on the US market and specifically on Aegis's US federal government contracting operations. The contract does not relate to any UK-based deployment or UK customer. Accordingly, the Aegis change-of-control provision does not materially affect UK competitive conditions.
As of the date of this Response, the consent process with Aegis is ongoing. Cloudium's management team and legal counsel are engaged in constructive discussions with Aegis's procurement office, and the Notifying Party is confident that consent will be obtained in advance of the anticipated closing of the Transaction. To the Notifying Party's knowledge, Aegis has not raised any substantive objections to the change of control.
9.2 Helix Data Systems GmbH
Cloudium is party to a Technology License Agreement dated March 9, 2020, with Helix Data Systems GmbH ("Helix"), a data management software provider headquartered in Frankfurt, Germany. Under this agreement, Cloudium licenses certain data integration middleware technology from Helix for incorporation into the Cloudium Analytics product. The Helix agreement contains a termination-for-change-of-control clause entitling Helix to terminate the agreement upon 90 days' written notice following a change of control of Cloudium.
The Helix agreement relates to technology licensing rather than customer-facing competition. The data integration middleware licensed from Helix is an input technology used within Cloudium Analytics and does not itself constitute a product sold to UK customers. The Notifying Party does not consider the Helix change-of-control provision to be relevant to the CMA's assessment of competitive effects in the UK.
Notwithstanding the above, Cloudium has taken proactive steps to engage with Helix regarding the Transaction. Cloudium's CTO, Raj Krishnamurthy, has been in direct communication with Helix's management team, and preliminary discussions regarding a revised or extended licence agreement have been constructive. The Notifying Party is confident that continuity of the Helix technology licence will be maintained.
9.3 No UK-Specific Change of Control Issues Affecting Competition
Beyond the Aegis and Helix contracts described above, the Notifying Party has conducted a comprehensive review of Cloudium's material customer and technology contracts for change-of-control provisions. None of the identified change-of-control provisions relates to a UK customer contract or otherwise raises any concern regarding the competitive dynamics of UK cloud ERP, CRM, or BI markets. The Notifying Party is satisfied that the change-of-control provisions in Cloudium's material contracts will not result in any material customer loss or competitive disruption in the UK.
10. Efficiencies and Customer Benefits