COMPETITION AND MARKETS AUTHORITY
MERGER NOTICE
Pursuant to the Enterprise Act 2002
CMA Case No. ME/7184/24
PROPOSED ACQUISITION BY SOLARA DIGITAL INFRASTRUCTURE FUND VI LP OF CLOUDIUM TECHNOLOGIES PLC
MERGER NOTICE FORM
Submitted pursuant to the Enterprise Act 2002 and the CMA's Mergers: Guidance on the CMA's jurisdiction and procedure (CMA2)
Date of Submission: February 12, 2024
Prepared by: Calderwood & Harkness LLP (London office: One Bartholomew Close, London EC1A 7BL) and Albright & Kerr LLP (5 New Street Square, London EC4A 3TW), counsel to the acquiring party.
CONFIDENTIAL VERSION — CONTAINS BUSINESS SECRETS
This document contains commercially sensitive and confidential information. The notifying party requests that this document and its annexes be treated in their entirety as confidential and not be disclosed to any third party without the prior written consent of counsel to the notifying party. Portions of this document that contain particularly sensitive business secrets are identified by square brackets marked "[CONFIDENTIAL]." A non-confidential version of this notice will be prepared and provided to the CMA upon request.
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SECTION 1: SUMMARY OF THE MERGER
1.1 Description of the Transaction
Solara Digital Infrastructure Fund VI LP ("Fund VI"), a Delaware limited partnership and the investing vehicle of Solara Digital Infrastructure LP ("Solara" or "SDILP"), a Delaware-based private equity sponsor, proposes to acquire the entire issued share capital of Cloudium Technologies plc ("Cloudium"), a public limited company incorporated under the laws of England and Wales (Company No. 09734521) and listed on the Nasdaq Global Select Market (ticker: CLDM) (the "Transaction" or the "Merger").
The acquisition is structured as a reverse triangular merger under the Delaware General Corporation Law ("DGCL"). Stratos Merger Sub Inc. ("Merger Sub"), a Delaware corporation formed solely for the purpose of effecting the Transaction and wholly owned by Fund VI, will merge with and into Cloudium, with Cloudium surviving the merger as a wholly owned subsidiary of Fund VI. This structure is standard for the acquisition of a publicly traded Delaware-incorporated (or, as in this case, an England and Wales-incorporated company with a US listing and Delaware merger mechanics) entity and ensures continuity of Cloudium's corporate existence, contractual relationships, licences, and regulatory authorisations following closing.
The total deal value of the Transaction is $6,800,000,000 (approximately £5,440,000,000 at an exchange rate of $1.25 per £1.00). The per-share merger consideration is approximately $36.92 in cash per share of Cloudium common stock, based on 184,200,000 shares of Cloudium common stock outstanding as of the date of the Merger Agreement. The per-share merger consideration represents a premium of approximately 32% to Cloudium's unaffected closing stock price on January 19, 2024 (the last full trading day prior to market speculation regarding a potential transaction), and a premium of approximately 28% to Cloudium's 30-day volume-weighted average share price as of the same date.
The merger consideration is payable in cash, subject to rollover elections by certain existing stockholders. Specifically, Jonathan Hargrove, Cloudium's Chief Executive Officer, has elected to roll over approximately 50% of his equity holdings (approximately 3,868,200 shares, representing approximately $142,814,544 in merger consideration) into equity of the surviving entity, and Pinnacle Growth Ventures LLC ("Pinnacle"), a growth equity firm that holds approximately 11.6% of Cloudium's outstanding shares, has elected to roll over approximately 60% of its equity holdings (approximately 12,820,320 shares, representing approximately $473,241,408 in merger consideration) into equity of the surviving entity. Total rollover equity commitments are approximately $616,055,952. All remaining shares of Cloudium common stock will be cancelled and converted into the right to receive the per-share merger consideration in cash.
The Agreement and Plan of Merger (the "Merger Agreement") was executed on January 22, 2024, among Cloudium Technologies plc, Stratos Merger Sub Inc., and Solara Digital Infrastructure Fund VI LP. A copy of the executed Merger Agreement is provided as a confidential annex to this Merger Notice (see Annex E).
The Transaction was publicly announced on January 23, 2024, via a joint press release issued by Solara and Cloudium and concurrent filings with the US Securities and Exchange Commission ("SEC"), including a Schedule 14A preliminary proxy statement filed by Cloudium.
1.2 Timetable
The principal milestones and anticipated timetable for the Transaction are as follows:
The parties anticipate that the Transaction will close in the first half of 2024, subject to the satisfaction or waiver of all conditions precedent set out in the Merger Agreement. These conditions include, among others: (i) receipt of requisite regulatory approvals, including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (ii) approval by the holders of a majority of the outstanding shares of Cloudium common stock entitled to vote at a duly convened stockholder meeting; (iii) the absence of any law or order prohibiting the consummation of the Merger; and (iv) certain customary bring-down conditions regarding the accuracy of representations and warranties and compliance with covenants.
The Merger Agreement provides for an outside date of June 30, 2024, after which either party may terminate the Merger Agreement if the closing has not occurred (subject to certain exceptions where a party's breach has been the primary cause of the failure to close).
1.3 Contact Details for the Notifying Party
The notifying party for the purposes of this Merger Notice is Solara Digital Infrastructure Fund VI LP, acting through the following legal advisers:
Primary counsel (UK regulatory):
Albright & Kerr LLP 5 New Street Square London EC4A 3TW United Kingdom
Lead Partner: Fiona McAllister Telephone: +44 (0)20 7839 4200
Email: fiona.mcallister@albrightkerr.com
Coordinating counsel:
Calderwood & Harkness LLP One Bartholomew Close London EC1A 7BL United Kingdom
Specialist Partner (Antitrust & Competition): Elaine Forsythe Telephone: +44 (0)20 7615 3000
Email: elaine.forsythe@calderwoodharkness.com
Responsible Partner (M&A): Harrison Wexford Telephone: +44 (0)20 7615 3045
Email: harrison.wexford@calderwoodharkness.com
Client contact:
Marcus Elliston Founder & Managing Partner Solara Digital Infrastructure LP 1200 Market Street, Suite 3400 Wilmington, DE 19801 United States Telephone: +1 (302) 555-8200
Email: melliston@solaradigital.com
Priya Narasimhan Co-Managing Partner & Chief Investment Officer Solara Digital Infrastructure LP 1200 Market Street, Suite 3400 Wilmington, DE 19801 United States Telephone: +1 (302) 555-8210
Email: pnarasimhan@solaradigital.com
All communications from the CMA in connection with this Merger Notice should be directed in the first instance to Fiona McAllister at Albright & Kerr LLP, with a copy to Elaine Forsythe at Calderwood & Harkness LLP.
SECTION 2: THE PARTIES
2.1 The Acquiring Party
2.1.1 Solara Digital Infrastructure LP
Solara Digital Infrastructure LP is a private equity sponsor focused on investments in digital infrastructure and enterprise software assets. Founded in 2011 by Marcus Elliston, Solara has grown to become one of the leading specialist investors in the digital infrastructure sector in North America and, increasingly, in Europe and Asia. As of December 31, 2023, Solara manages approximately $38 billion in assets under management across six flagship funds and a number of co-investment and continuation vehicles.
Solara's investment strategy is centred on identifying market-leading platforms in the enterprise software, cloud infrastructure, data analytics, and SaaS sectors. Solara typically targets platform investments where it can deploy significant capital alongside experienced management teams, drive organic growth through product innovation and go-to-market expansion, and pursue disciplined add-on acquisitions to build scale and capability. Solara has completed over 60 add-on acquisitions across its platform portfolio companies and has a track record of supporting portfolio companies in their international expansion efforts, including in the United Kingdom and the broader European market.
Across Funds IV through VI, Solara currently maintains 14 active platform investments. These span a range of subsectors within the digital infrastructure and enterprise software landscape, including cloud computing, data centre operations, cybersecurity, fintech infrastructure, supply chain management software, and vertical SaaS solutions. A summary of Solara's portfolio companies and their UK activities (if any) is provided in Section 5.1 below and in the corporate structure chart at Annex A.
Solara Digital GP LLC, the general partner of Solara Digital Infrastructure LP, is a Delaware limited liability company controlled by Marcus Elliston and Priya Narasimhan. Solara Digital GP LLC has ultimate authority over investment decisions and fund management matters, subject to the terms of the relevant limited partnership agreements and any applicable advisory committee or limited partner consent rights.
2.1.2 Solara Digital Infrastructure Fund VI LP (the Investing Fund)
Fund VI is Solara's most recent flagship fund. Fund VI held its final close in September 2022 with $12.4 billion in aggregate capital commitments from a diversified base of institutional limited partners, including public and private pension funds, sovereign wealth funds, university endowments, insurance companies, and family offices. Fund VI's investment mandate is consistent with Solara's broader strategy of investing in digital infrastructure and enterprise software platforms, with a particular emphasis on cloud-native SaaS businesses with recurring revenue profiles and demonstrable market leadership positions.
Fund VI is the entity that will directly own the entire issued share capital of Cloudium Technologies plc upon completion of the Merger. Specifically, following the closing, Merger Sub (as described in Section 2.1.3 below) will merge with and into Cloudium, and Cloudium will survive the merger as a wholly owned subsidiary of Fund VI.
The general partner of Fund VI is Solara Fund VI GP LLC, a Delaware limited liability company. Solara Fund VI GP LLC is in turn controlled by the managing partners of Solara Digital Infrastructure LP (Marcus Elliston and Priya Narasimhan) and exercises investment authority over Fund VI's portfolio, subject to the terms of the Fund VI limited partnership agreement.
As of the date of this Merger Notice, Fund VI has made three platform investments (excluding the proposed acquisition of Cloudium) and has approximately $6.8 billion in remaining uncalled capital commitments available for deployment. The proposed acquisition of Cloudium, at a total equity commitment of approximately $2.83 billion (inclusive of the co-investment described in Section 2.1.4 below), represents Fund VI's largest single platform investment to date.
2.1.3 Stratos Merger Sub Inc.
Stratos Merger Sub Inc. was incorporated in the State of Delaware on January 8, 2024, solely for the purpose of effectuating the Merger. Merger Sub has not conducted any business operations, acquired any assets, or incurred any liabilities other than in connection with its incorporation and the execution of the Merger Agreement and related transaction documents.
Upon the closing of the Transaction, Merger Sub will merge with and into Cloudium in accordance with the DGCL, with Cloudium surviving the merger. As a consequence of the merger, Merger Sub will cease to exist as a separate legal entity, and Cloudium will continue as a wholly owned subsidiary of Fund VI.
2.1.4 Solara Digital Co-Invest VI-A LP
Solara Digital Co-Invest VI-A LP is a co-investment vehicle formed to accommodate co-investment by certain Fund VI limited partners in connection with the Cloudium acquisition. The co-investment vehicle has secured commitments of $425,000,000 from select limited partners of Fund VI who wished to increase their exposure to the Transaction beyond their pro rata share of the Fund VI equity commitment. Solara Fund VI GP LLC serves as the general partner of the co-investment vehicle.
The co-investment will be deployed alongside the Fund VI equity commitment to finance the acquisition of Cloudium. The co-investment vehicle will hold its interest in Cloudium indirectly, through its participation in the Fund VI capital structure at closing.
2.1.5 Solara's Existing UK Activities
Solara, through its various fund vehicles, currently holds 14 platform investments across Funds IV, V, and VI. The notifying party has conducted a thorough review of the activities of each of these portfolio companies to identify any that have material operations, revenues, or customer relationships in the United Kingdom. The results of this review are summarised below and inform the competitive assessment set out in Sections 7 and 8 of this Merger Notice.
Of Solara's 14 current platform investments, the following have been identified as having some degree of UK presence:
(a) Vantage Supply Chain Solutions, Inc. (Fund V portfolio company; headquarters: Austin, Texas). Vantage provides cloud-based supply chain management and logistics optimisation software to enterprise customers. Vantage has a small UK sales office (12 employees) in Reading, Berkshire, and generated approximately [CONFIDENTIAL] in UK revenue in FY2023. Vantage's products are focused on supply chain planning and warehouse management and do not overlap with Cloudium's cloud ERP, CRM, or BI offerings.
(b) Pinnacle Investors Cybersecurity Holdings, Inc. (Fund V portfolio company; headquarters: McLean, Virginia). Pinnacle Investors provides managed security services and endpoint protection solutions. Pinnacle Investors has a UK subsidiary, Pinnacle Investors Cybersecurity UK Ltd., employing approximately 85 staff in London. Pinnacle Investors generated approximately [CONFIDENTIAL] in UK revenue in FY2023. Pinnacle Investors's products relate to cybersecurity, a segment entirely distinct from Cloudium's core ERP, CRM, and BI product lines.
(c) NovaBridge Data Analytics, Inc. (Fund VI portfolio company; headquarters: Boston, Massachusetts). NovaBridge provides specialised data analytics and data engineering tools for the financial services sector. NovaBridge has recently established a small commercial presence in the UK, with 8 employees in London, and generated approximately [CONFIDENTIAL] in UK revenue in FY2023. While NovaBridge's offerings include certain analytical tools that might, at the broadest level of market definition, be considered adjacent to business intelligence software, NovaBridge's products are highly specialised financial data engineering tools designed for quantitative trading and risk management applications, and do not compete with Cloudium's general-purpose BI platform. This is discussed further in the competitive assessment at Section 7.
No other Solara portfolio company has a material UK presence, generates material UK revenues, or supplies products or services that could overlap with Cloudium's cloud ERP, CRM, or BI offerings. A complete list of Solara's portfolio companies, with a summary of their business activities and any UK nexus, can be provided to the CMA upon request.
2.2 The Target
2.2.1 Cloudium Technologies plc
Cloudium Technologies plc was incorporated in England and Wales in 2015 and listed on the Nasdaq Global Select Market in 2018 following an initial public offering that raised approximately $480 million. Since its IPO, Cloudium has grown significantly, both organically and through a number of strategic acquisitions, and has established itself as a leading provider of cloud-native enterprise application software.
The current senior management and board of directors of Cloudium are as follows:
• Chief Executive Officer: Jonathan Hargrove
• Chief Financial Officer: Sienna Whitfield
• General Counsel: Nadia Chowdhury
• Chief Technology Officer: Rajesh Kapoor
• Chief Revenue Officer: Laura Bennington
• Board Chair: Douglas Pemberton (independent non-executive director)
Business description: Cloudium is a provider of cloud-native enterprise resource planning ("ERP"), customer relationship management ("CRM"), and business intelligence ("BI") SaaS solutions serving mid-market and enterprise customers globally. Cloudium's platform is designed to provide an integrated, modular suite of enterprise applications delivered via a multi-tenant cloud architecture, enabling customers to manage core business processes including financial management, human capital management, procurement, sales and marketing automation, customer service, and data-driven decision-making from a single, unified platform.
Cloudium's customer base spans multiple industry verticals, including financial services, retail and consumer goods, healthcare and life sciences, professional services, technology, manufacturing, and the public sector. As of December 31, 2023, Cloudium served approximately 14,500 customers worldwide, including approximately 2,800 enterprise customers (defined as customers with annual contract values exceeding $100,000) and approximately 11,700 mid-market customers.
Cloudium employs approximately 6,800 people globally, with principal offices and employee concentrations in the following locations:
Cloudium's auditors are Harwell & Dobson LLP, with offices at 200 Clarendon Street, Boston, MA 02116 (US principal office) and 1 Finsbury Avenue, London EC2M 2PF (UK office). The engagement partner for the Cloudium audit is Martin Chisholm.
2.2.2 Cloudium Financial Overview
The following table presents key financial data for Cloudium Technologies plc on a consolidated basis:
Cloudium has demonstrated consistent top-line growth over the last three fiscal years, driven by strong new customer acquisition, healthy net revenue retention, and the successful cross-selling of CRM and BI modules to its existing ERP customer base. Cloudium's revenue grew at a compound annual growth rate of approximately [CONFIDENTIAL] over the period FY2021 to FY2023, and its ARR grew from approximately [CONFIDENTIAL] as of December 31, 2021 to $1,740,000,000 as of December 31, 2023.
Additional financial data, including a breakdown of revenue by product line and geography, is provided in Annex B.
2.2.3 Cloudium's UK Subsidiary
Cloudium Technologies UK Ltd. is the primary operating entity for Cloudium's business in the United Kingdom and serves as the principal hub for Cloudium's broader EMEA operations. Cloudium UK was incorporated in England and Wales in 2018, shortly after Cloudium's IPO, as Cloudium expanded its European operations and established a dedicated UK presence.
Cloudium UK's activities in the United Kingdom encompass the full range of commercial and operational functions necessary to serve Cloudium's UK and EMEA customer base, including:
(a) Sales and business development for UK and EMEA customers;
(b) Customer success management, including account management, onboarding, and customer training;
(c) Professional services, including implementation consulting, systems integration, and custom configuration services;
(d) Product engineering, including a team of approximately 200 software engineers in London contributing to the development and enhancement of the Cloudium platform;
(e) Technical support and customer service operations for UK and EMEA time zones; and
(f) Corporate and administrative functions, including finance, legal, and human resources.
Cloudium UK employs approximately 1,200 people across its two UK offices in London (45 Broadwick Street, London W1F 0DB — principal UK office) and Manchester (3 Hardman Square, Spinningfields, Manchester M3 3EB). The London office serves as the base for the majority of Cloudium's UK sales, customer success, professional services, and engineering staff, while the Manchester office primarily houses technical support, customer service, and certain engineering teams.
Cloudium UK generated revenue of £312,000,000 (approximately $390,000,000) in the fiscal year ended September 30, 2023. This represents approximately 24% of Cloudium's consolidated global revenue. The UK revenue figure comprises subscription revenue (the substantial majority), professional services revenue, and support revenue attributable to UK-domiciled customers. A breakdown of Cloudium UK's revenue by product line is provided in Annex B.
Cloudium UK's customer base includes a diverse range of mid-market and enterprise customers across multiple verticals, including financial services (banks, insurers, asset managers), retail and consumer goods, healthcare (including NHS trusts and private healthcare providers), professional services (consulting firms, law firms, accounting practices), and the public sector (central government departments and local authorities). Specific customer names and details are provided in the Confidential Annex (Annex D).
2.2.4 Cloudium's Other Key Subsidiaries
In addition to Cloudium Technologies UK Ltd., Cloudium operates through the following principal subsidiaries:
Cloudium Technologies India Pvt. Ltd.
Cloudium Technologies India Pvt. Ltd. is a private limited company incorporated under the laws of India, with its registered office in Bangalore, Karnataka, India. The Indian subsidiary employs approximately 2,400 people and serves as Cloudium's principal centre of excellence for research and development, software engineering, quality assurance, and technical support operations. The Indian subsidiary does not generate third-party revenue and functions as a captive service centre for the Cloudium group.
Cloudium Solutions GmbH
Cloudium Solutions GmbH is a limited liability company (Gesellschaft mit beschränkter Haftung) incorporated under the laws of Germany, with its registered office in Berlin. The German subsidiary employs approximately 400 people and is responsible for sales, customer success, and professional services in the DACH region (Germany, Austria, and Switzerland). Cloudium Solutions GmbH generated revenue of approximately [CONFIDENTIAL] in FY2023.
2.2.5 Key Shareholders of Cloudium
The following table sets out the principal shareholders of Cloudium Technologies plc as of the date of the Merger Agreement:
Jonathan Hargrove is the co-founder and Chief Executive Officer of Cloudium. Mr Hargrove has served as CEO since the company's founding in 2015. Under the terms of the Merger Agreement, Mr Hargrove has elected to roll over approximately 50% of his equity interest (approximately 3,868,200 shares, representing approximately $142,814,544 in value at the per-share merger consideration) into equity of the surviving entity. Mr Hargrove has entered into a rollover agreement and a new employment agreement with the surviving entity, each effective upon closing, pursuant to which he will continue to serve as CEO of Cloudium post-acquisition.
Pinnacle Growth Ventures LLC is a growth equity firm organised as a Delaware limited liability company, with headquarters at 777 Third Avenue, 28th Floor, New York, NY 10017. Pinnacle's Managing Member is Evelyn Carmichael. Pinnacle was an early investor in Cloudium, having led the company's Series B financing round in 2016. Pinnacle currently holds 21,367,200 shares (approximately 11.6% of outstanding shares) and has two designated seats on Cloudium's board of directors. Under the Merger Agreement, Pinnacle has elected to roll over approximately 60% of its equity interest (approximately 12,820,320 shares, representing approximately $473,241,408 in value) into equity of the surviving entity. The aggregate rollover equity commitment from Mr Hargrove and Pinnacle is approximately $616,055,952.
The remaining 84.2% of Cloudium's outstanding shares are held by a dispersed base of public stockholders. No other stockholder holds more than 5% of Cloudium's outstanding common stock based on the most recent Schedule 13F filings reviewed by counsel.
SECTION 3: JURISDICTION — THE CMA'S DUTY TO REFER
3.1 Turnover Test
The CMA has a duty to refer a relevant merger situation for a Phase 2 investigation where it believes that it is or may be the case that a relevant merger situation has been created or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation, and the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition ("SLC") within any market or markets in the United Kingdom for goods or services (Section 22 and Section 33 of the Enterprise Act 2002, as applicable).
A relevant merger situation arises where two or more enterprises cease to be distinct and either (i) the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million (the "turnover test"), or (ii) the enterprises which cease to be distinct together supply or acquire at least 25% of all goods or services of a particular description in the United Kingdom or in a substantial part of the United Kingdom, and the merger results in an increment to that share (the "share of supply test") (Section 23 of the Enterprise Act 2002).
With respect to the turnover test, the relevant enterprise for the purposes of this analysis is Cloudium Technologies plc and, in particular, its UK operating subsidiary, Cloudium Technologies UK Ltd. As described in Section 2.2.3 above, Cloudium Technologies UK Ltd. generated revenue of £312,000,000 in the fiscal year ended September 30, 2023. This figure is derived from Cloudium Technologies UK Ltd.'s statutory accounts filed with Companies House and is corroborated by the management accounts and audited consolidated financial statements of Cloudium Technologies plc.
The UK turnover of the target enterprise (£312,000,000) substantially exceeds the £70 million threshold prescribed by Section 23(1)(b) of the Enterprise Act 2002.
Conclusion: The turnover test under Section 23(1)(b) of the Enterprise Act 2002 is satisfied.
3.2 Share of Supply Test
As an alternative and supplementary basis for establishing the CMA's jurisdiction, the notifying party has also considered whether the share of supply test under Section 23(2)–(4) of the Enterprise Act 2002 is met.
Cloudium Technologies UK Ltd. supplies cloud-native ERP, CRM, and BI software to customers in the United Kingdom. Based on the market share analysis set out in Section 7.2 below and in Annex C, Cloudium holds a material share of supply in each of the relevant UK product markets (cloud ERP, cloud CRM, and cloud BI software). While the Transaction does not give rise to any material increment to the share of supply (given the absence of material horizontal overlaps, as discussed in Section 7), the notifying party acknowledges that the CMA may consider the share of supply test to be met on the basis of Cloudium's own share of supply in one or more of these segments.
The parties submit that the share of supply test is met on the basis of Cloudium's presence in the supply of cloud ERP and CRM software in the UK, where Cloudium's estimated UK share of supply exceeds 25% in at least one plausible product market frame (see Annex C for detailed estimates).
Conclusion: The share of supply test under Section 23(2)–(4) of the Enterprise Act 2002 is also satisfied.
3.3 Relevant Enterprises
For the purposes of Section 129 of the Enterprise Act 2002, an "enterprise" means the activities, or part of the activities, of a business. Cloudium Technologies plc, through its UK subsidiary Cloudium Technologies UK Ltd., carries on the activities of a business in the United Kingdom, including the development, marketing, sale, implementation, and support of cloud-native ERP, CRM, and BI SaaS software. Cloudium Technologies plc (together with Cloudium Technologies UK Ltd.) therefore constitutes an "enterprise" within the meaning of Section 129.
Solara Digital Infrastructure Fund VI LP, through its wholly owned subsidiary Stratos Merger Sub Inc., will acquire the entire issued share capital of Cloudium Technologies plc pursuant to the Merger. As a result of the Transaction, Cloudium will become a wholly owned subsidiary of Fund VI, and Solara (through Fund VI) will acquire decisive control over Cloudium, including the ability to control the policy of Cloudium. Accordingly, upon completion of the Transaction, the enterprises of Cloudium and Solara (through its portfolio investments, to the extent relevant) will cease to be distinct enterprises within the meaning of Section 26 of the Enterprise Act 2002.
3.4 Anticipated / Completed Merger
This Merger Notice is submitted in respect of an anticipated merger. The Merger Agreement was executed on January 22, 2024, and the Transaction has not yet completed as of the date of this filing. Closing of the Transaction is conditional upon, inter alia:
(a) expiration or termination of the applicable waiting period under the HSR Act;
(b) the absence of any law, order, or injunction prohibiting the consummation of the Merger;
(c) the approval of the holders of a majority of the outstanding shares of Cloudium common stock;
(d) CMA clearance (to the extent required by the CMA); and
(e) the satisfaction or waiver of certain other customary closing conditions.
The parties have voluntarily submitted this Merger Notice in advance of closing in order to facilitate the CMA's review and to demonstrate their commitment to full cooperation with the CMA's merger control process. While the Transaction is not subject to a mandatory pre-completion notification requirement under the Enterprise Act 2002, the notifying party considers it appropriate to engage with the CMA at the earliest practicable stage to enable an efficient and timely review.
SECTION 4: TRANSACTION RATIONALE
4.1 Strategic Rationale
Solara's decision to pursue the acquisition of Cloudium is grounded in Fund VI's core investment thesis and reflects Solara's deep sector expertise in enterprise software and cloud infrastructure.
Investment thesis: Solara has identified Cloudium as a leading SaaS platform serving mid-market and enterprise customers with a comprehensive, cloud-native suite of ERP, CRM, and BI solutions. Key elements of Solara's investment thesis include:
(a) Market-leading platform with strong recurring revenue: Cloudium's ARR of $1,740,000,000 (as of December 31, 2023) reflects a large and growing base of recurring subscription revenue, supported by high net revenue retention rates and low churn. Cloudium's installed base of approximately 14,500 customers across diverse industry verticals provides a resilient revenue foundation.
(b) Attractive growth profile: Cloudium has demonstrated consistent revenue growth, driven by strong new customer acquisition, effective cross-selling of CRM and BI modules to its ERP customer base, and expansion within existing accounts through upselling of premium features, additional user licences, and incremental modules. The cloud ERP, CRM, and BI markets in which Cloudium operates are characterised by secular tailwinds, including the ongoing migration of enterprise workloads from legacy on-premises software to cloud-native SaaS solutions.
(c) Operational improvement opportunity: Solara believes that there is an opportunity to enhance Cloudium's operational efficiency and margin profile under private ownership. As a private company, Cloudium will benefit from Solara's operational expertise and dedicated resources, including Solara's portfolio operations team, which has deep experience in driving margin expansion, go-to-market optimisation, and engineering productivity improvements in enterprise software businesses.
(d) Product expansion and innovation: Solara intends to support Cloudium in accelerating its product development roadmap, including investments in artificial intelligence and machine learning capabilities, enhanced analytics and reporting tools, and expanded vertical-specific functionality. Solara's portfolio of digital infrastructure assets may also provide complementary capabilities and partnership opportunities, although no specific integration or product bundling plans are contemplated at this time.
(e) International expansion: Cloudium has a strong UK and European presence through Cloudium Technologies UK Ltd. and Cloudium Solutions GmbH, and Solara sees an opportunity to further expand Cloudium's footprint in underserved European and Asia-Pacific markets through targeted sales and marketing investments.
The Cloudium acquisition represents a platform investment consistent with Fund VI's mandate to deploy capital in high-quality enterprise software and cloud infrastructure businesses with recurring revenue profiles, strong competitive moats, and attractive long-term growth prospects.
No efficiency claims: The notifying party is not advancing any efficiency claims for the purposes of the CMA's competitive assessment. While Solara believes that the Transaction will generate significant value for Cloudium and its stakeholders, the primary basis for the Transaction is Solara's strategic and financial investment thesis as described above, rather than any expectation of rivalry-enhancing efficiencies that would be relevant to the CMA's analysis of the competitive effects of the Merger.
4.2 Consideration and Financing
Total consideration: The aggregate transaction value is $6,800,000,000 (approximately £5,440,000,000). The per-share merger consideration is approximately $36.92 in cash per share of Cloudium common stock. All shares of Cloudium common stock that are not subject to rollover elections will be cancelled and converted into the right to receive the per-share merger consideration in cash, without interest, upon completion of the Merger.
Sources of funds: The Transaction will be financed through a combination of committed debt financing, equity contributions from Fund VI and its co-investment vehicle, and rollover equity from certain existing stockholders, as summarised in the following table:
The excess of total sources over the $6,800,000,000 enterprise value will be used to (i) repay Cloudium's existing indebtedness (see below), (ii) fund estimated transaction fees and expenses of approximately [CONFIDENTIAL], and (iii) fund cash to the balance sheet.
Debt financing: The committed debt financing consists of a Term Loan B facility in an aggregate principal amount of $3,740,000,000 with a seven-year maturity and an interest rate of SOFR plus 325 basis points, and a Revolving Credit Facility in an aggregate principal amount of up to $500,000,000 with a five-year maturity, which is expected to be undrawn at closing. The administrative agent for the credit facilities is Meridian Atlantic Bank, N.A., and the co-arranger is Ironclad Capital Markets LLC. The Debt Commitment Letter was executed on January 22, 2024, concurrently with the execution of the Merger Agreement. Counsel to the lenders is Winthrop & Hale LLP (lead partner: Christine Novak).
The commitments under the Debt Commitment Letter are subject to customary conditions, including the consummation of the Merger in accordance with the terms of the Merger Agreement, the accuracy of specified representations and warranties, the delivery of certain financial statements and other documentation, and the payment of agreed fees.
Equity financing: Fund VI has delivered an Equity Commitment Letter to Cloudium, executed on January 22, 2024, pursuant to which Fund VI has committed to contribute, directly or through designated co-investment vehicles, up to $2,832,888,096 in cash equity to fund the Merger consideration and related transaction costs. The Equity Commitment Letter is subject to customary conditions, including the consummation of the Merger.
Refinancing of existing indebtedness: Cloudium's existing indebtedness of approximately $820,000,000 under a credit agreement dated March 15, 2021, with Atlas Commercial Lending Corp. as administrative agent, will be repaid in full at or prior to the closing of the Transaction. This existing indebtedness consists of a term loan in the principal amount of approximately $620,000,000 and a revolving credit facility with $200,000,000 drawn as of the most recent reporting date. The repayment will be funded from the proceeds of the new debt and equity financing described above.
SECTION 5: RELEVANT MERGER PARTIES' ACTIVITIES IN THE UK
5.1 Acquirer's Activities in the UK
As described in Section 2.1.5 above, the notifying party has conducted a comprehensive review of the activities of each of Solara's portfolio companies across Funds IV, V, and VI to identify any entities with material operations, revenues, or customer relationships in the United Kingdom. The purpose of this review is to identify any potential horizontal overlaps, vertical relationships, or conglomerate linkages that may be relevant to the CMA's competitive assessment.
Of Solara's 14 current platform investments, three have been identified as having some degree of UK presence:
(a) Vantage Supply Chain Solutions, Inc. (Fund V)
Vantage provides cloud-based supply chain management and logistics optimisation software. Vantage maintains a small UK sales office in Reading, Berkshire, employing approximately 12 people. Vantage's UK revenue in FY2023 was approximately [CONFIDENTIAL]. Vantage's products are focused exclusively on supply chain planning, demand forecasting, and warehouse management. These products do not overlap with Cloudium's cloud ERP, CRM, or BI offerings and are sold to a distinct customer base (principally logistics companies and retailers with complex supply chain operations). Vantage does not compete with Cloudium in any relevant product market.
(b) Pinnacle Investors Cybersecurity Holdings, Inc. (Fund V)
Pinnacle Investors provides managed security services and endpoint protection solutions to enterprise customers. Pinnacle Investors operates through a UK subsidiary, Pinnacle Investors Cybersecurity UK Ltd., employing approximately 85 staff in London. Pinnacle Investors's UK revenue in FY2023 was approximately [CONFIDENTIAL]. Pinnacle Investors's products and services relate to cybersecurity — a segment entirely distinct from Cloudium's core ERP, CRM, and BI product lines. There is no competitive overlap between Pinnacle Investors and Cloudium.
(c) NovaBridge Data Analytics, Inc. (Fund VI)
NovaBridge provides specialised data analytics and data engineering tools designed for the financial services industry. NovaBridge recently established a small commercial presence in the UK, with 8 employees in London, and generated approximately [CONFIDENTIAL] in UK revenue in FY2023. NovaBridge's products include certain analytical tools that, at the broadest possible level of market definition, might be considered adjacent to the broad category of "business intelligence" software. However, NovaBridge's tools are highly specialised financial data engineering solutions designed for quantitative trading desks, risk management functions, and alternative data integration. They are architected for a fundamentally different use case (real-time financial data processing and quantitative modelling) and are sold to a fundamentally different customer base (investment banks, hedge funds, and proprietary trading firms) than Cloudium's general-purpose cloud BI platform, which is designed for business users across a wide range of industries and functional areas (marketing analytics, operational reporting, executive dashboards, etc.).
The notifying party submits that, even under the broadest possible market definition, there is no material competitive overlap between NovaBridge and Cloudium in the UK. This conclusion is further supported by the analysis set out in Sections 7.1 and 7.3 below.
No other Solara portfolio company has a material UK presence or supplies products or services that could overlap with Cloudium's cloud ERP, CRM, or BI offerings in the UK or globally.
5.2 Target's Activities in the UK
Cloudium Technologies UK Ltd. is the principal UK operating entity of the Cloudium group and is responsible for all aspects of Cloudium's business in the United Kingdom and, to a significant extent, the broader EMEA region. The UK subsidiary's activities have been described in detail in Section 2.2.3 above and are summarised here for convenience.
Products supplied in the UK: Cloudium supplies the following cloud-native SaaS products to UK customers through Cloudium Technologies UK Ltd.:
(a) Cloud ERP: Cloudium's flagship enterprise resource planning platform, which provides integrated modules for financial management, human capital management, procurement, project management, and operational planning. The ERP platform is Cloudium's largest product line by UK revenue, accounting for approximately [CONFIDENTIAL] of Cloudium UK's total revenue.
(b) Cloud CRM: Cloudium's customer relationship management platform, which provides modules for sales force automation, marketing automation, customer service management, and partner relationship management. The CRM platform accounts for approximately [CONFIDENTIAL] of Cloudium UK's total revenue.
(c) Cloud BI / Analytics: Cloudium's business intelligence and analytics platform, which provides tools for data visualisation, reporting, ad hoc analysis, and predictive analytics. The BI platform accounts for approximately [CONFIDENTIAL] of Cloudium UK's total revenue.
Revenue in the UK: Cloudium Technologies UK Ltd. generated total revenue of £312,000,000 (approximately $390,000,000) in the fiscal year ended September 30, 2023. A breakdown of this revenue by product line is provided in Annex B.
UK employees: Cloudium UK employs approximately 1,200 people across its London and Manchester offices, as described in Section 2.2.3.
Customer segments: Cloudium UK serves a diversified base of mid-market and enterprise customers across the following principal verticals:
• Financial services (banks, insurers, asset managers, fintech companies)
• Retail and consumer goods
• Healthcare (including NHS trusts and private healthcare providers)
• Professional services (consulting, legal, accounting)
• Technology and media
• Manufacturing
• Public sector (central government departments, local authorities, and agencies)
Specific customer names, together with relevant contact details for the CMA's use in its Phase 1 review, are provided in the Confidential Annex at Annex D.
Note regarding Aegis Federal Solutions Inc.: The notifying party notes that Cloudium's largest single customer relationship by ARR is with Aegis Federal Solutions Inc. ("Aegis"), a US government contractor, which accounts for approximately $84,000,000 in ARR. The Aegis relationship is focused exclusively on US federal government contracts and is managed entirely from Cloudium's US headquarters in San Francisco. Aegis does not have any material UK operations, and the Aegis customer relationship has limited UK nexus. The notifying party does not consider the Aegis relationship to be relevant to the CMA's competitive assessment of the Transaction in the UK context.
SECTION 6: MARKET DEFINITION
6.1 Product Market Definition
The parties have considered the appropriate product market definitions for the purposes of the CMA's competitive assessment of the Transaction. Consistent with the CMA's established practice and previous decisional practice in software and technology mergers, the parties propose that the competitive assessment should focus on the following three product markets, each considered separately.
6.1.1 Cloud ERP Software
Cloud-native enterprise resource planning software encompasses integrated software platforms that enable businesses to manage core operational processes — including financial management, human capital management, procurement, supply chain management, project management, and operational planning — through a cloud-delivered, SaaS model. Cloud ERP is distinguished from traditional on-premises ERP software by its delivery model (multi-tenant cloud infrastructure, subscription-based pricing, automatic updates), as well as by its architecture (modern, API-first, microservices-based) and user experience.
The UK cloud ERP market has experienced significant growth in recent years, driven by the ongoing transition of enterprise workloads from legacy on-premises systems (such as those provided by Hollowell & Co., Ridgeline Industries, and Ashbury Holdings) to cloud-native alternatives. This transition is underpinned by several structural factors, including the lower total cost of ownership of cloud ERP solutions, the enhanced flexibility and scalability of cloud delivery, and the ability of cloud ERP vendors to deliver continuous innovation through regular platform updates.
The cloud ERP market can be segmented by the size of the target customer: (i) large enterprise cloud ERP (targeting organisations with annual revenues exceeding approximately $1 billion or employee counts exceeding approximately 5,000); and (ii) mid-market cloud ERP (targeting organisations with annual revenues of approximately $50 million to $1 billion or employee counts of approximately 200 to 5,000). Cloudium serves both segments but has historically been strongest in the mid-market and upper mid-market segments, with an increasing presence in the enterprise segment.
Cloudium is one of several significant suppliers of cloud ERP software in the UK. The principal competitors include Hollowell & Co. (with its Harborline Software Cloud offering), Ridgeline Industries (with Ridgeline Industries Fusion Cloud ERP), Ashbury Holdings (with Ashbury Holdings Dynamics 365), Ashbury & Co. (principally in financial management and HCM), Vireo Partners LLC (principally in the lower mid-market segment), and a number of other SaaS and on-premises vendors.
6.1.2 Cloud CRM Software
Cloud-based customer relationship management software encompasses platforms that enable businesses to manage customer-facing processes, including sales force automation, marketing automation, customer service and support, and partner relationship management, through a cloud-delivered SaaS model.
The cloud CRM market is one of the largest and most established segments of the enterprise software industry. The UK cloud CRM market is dominated by Larkspur Solutions ("Pinnacle Health IT"), which is widely recognised as the market leader globally and in the UK. Other significant competitors include Ashbury Holdings (Dynamics 365 CRM), Ridgeline Industries (Ridgeline Industries CX Cloud), Strathmore Group (principally in the SMB and lower mid-market segments), Hollowell & Co. (Hollowell & Co. CRM Cloud), Zoho Corporation, and a number of vertical-specific CRM vendors.
Cloudium's CRM offering is typically sold as part of an integrated suite alongside its ERP and BI products, and Cloudium's competitive strength in CRM derives in significant part from the platform's integration with the broader Cloudium ecosystem. Cloudium is not the market leader in standalone CRM but competes effectively for customers who value the benefits of an integrated, unified platform encompassing ERP, CRM, and BI capabilities.
6.1.3 Business intelligence / Analytics Software
Cloud-based business intelligence and analytics software encompasses platforms that enable businesses to collect, integrate, analyse, and visualise data from multiple sources to support data-driven decision-making. BI platforms typically provide capabilities including interactive dashboards, ad hoc reporting, data exploration, predictive analytics, and, increasingly, AI-assisted insight generation.
The UK cloud BI market is highly competitive and includes both specialist BI vendors (such as Westvale Health IT (now part of Pinnacle Health IT), Qlik Technologies, Sisense, and Looker (now part of Northgate Corporation)) and broader enterprise software vendors that offer BI capabilities as part of an integrated platform (such as Ashbury Holdings (Power BI), Hollowell & Co. (Hollowell & Co. Analytics Cloud), Ridgeline Industries, and Cloudium). The market is characterised by significant innovation, low switching costs for many use cases, and a high degree of interoperability among BI tools and underlying data sources.
Cloudium's BI offering is a native component of the Cloudium platform and is designed to provide customers with real-time analytical capabilities across their ERP and CRM data. While Cloudium's BI platform can be licensed on a standalone basis, the majority of Cloudium's BI revenue is derived from customers who also subscribe to Cloudium's ERP and/or CRM products.
6.1.4 Parties' Proposed Product Market
For the purposes of this Merger Notice and the CMA's competitive assessment, the parties submit that the relevant product markets are:
(i) Cloud ERP software;
(ii) Cloud CRM software; and