MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
This memorandum has been prepared by Calderwood & Harkness LLP and contains confidential attorney-client privileged information and attorney work product. It is intended solely for the use of the named addressees and should not be disseminated, distributed, or copied to any third party without the prior written consent of Calderwood & Harkness LLP. Disclosure of this memorandum to any third party may constitute a waiver of applicable privileges.
TO: Harrison Wexford, Responsible Partner, Mergers & Acquisitions
FROM: Elaine Forsythe, Specialist Partner, Antitrust & Competition
CC: Tiffany Rosenthal, Lead Associate, M&A; Beatrice Holloway, Billing Partner, M&A
DATE: January 25, 2024
RE: HSR Act Pre-Filing Analysis — Proposed Acquisition of Cloudium Technologies plc by Solara Digital Infrastructure Fund VI LP
MATTER NO.: 1041-00003
I. Executive Summary
Calderwood & Harkness LLP has been engaged to advise Solara Digital Infrastructure LP ("Solara" or "SDILP") in connection with the proposed acquisition of Cloudium Technologies plc ("Cloudium" or the "Target"), a UK-incorporated, Nasdaq-listed (ticker: CLDM) cloud-based enterprise software company, by Solara Digital Infrastructure Fund VI LP ("Fund VI") through a reverse triangular merger with Stratos Merger Sub Inc. ("Merger Sub," and together with Fund VI, the "Acquiring Parties"). The Merger Agreement and Plan of Merger (the "Merger Agreement") was executed on January 22, 2024, and publicly announced on January 23, 2024. The aggregate equity value of the transaction is approximately $6,800,000,000, representing approximately $36.92 per share for approximately 184,200,000 shares of Cloudium common stock outstanding (the "Transaction").
This memorandum analyzes the following issues in connection with the Transaction:
(a) reportability of the Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), 15 U.S.C. § 18a, and its implementing regulations at 16 C.F.R. Parts 801–803;
(b) satisfaction of the applicable size-of-transaction and size-of-person thresholds for calendar year 2024;
(c) identification of the correct filing person(s) for both the acquiring and acquired sides of the Transaction, including determination of the ultimate parent entity ("UPE") of the acquiring person;
(d) potential substantive competitive overlap issues arising from the Transaction in the cloud enterprise resource planning ("ERP"), customer relationship management ("CRM"), and business intelligence ("BI") software-as-a-service ("SaaS") markets; and
(e) recommended filing strategy and timeline to achieve regulatory clearance in advance of the scheduled outside date.
Based on our analysis, we have reached the following conclusions:
• The Transaction is reportable under the HSR Act.
• Both the size-of-transaction test and the size-of-person test (to the extent applicable) are clearly satisfied.
• The filing should be made promptly — on or about February 9, 2024 — to initiate the 30-day initial waiting period under Section 7A(b)(1)(B) of the Clayton Act.
• We assess the risk of a Second Request (formal request for additional information and documentary material pursuant to Section 7A(e) of the Clayton Act) as low, based on the limited horizontal overlap between Cloudium's product offerings and those of any current Solara portfolio company.
• The Transaction presents a financial-sponsor acquisition in a fragmented and highly competitive market, and the agencies have historically been less likely to pursue extended investigation in such circumstances absent clear evidence of competitive concern.
The balance of this memorandum sets forth our detailed analysis and recommendations.
II. Transaction Overview
A. Parties to the Transaction
Acquirer. The acquiring entity is Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership with vintage year 2022 and approximately $12.4 billion in committed capital. Fund VI is one of six flagship funds managed by Solara Digital Infrastructure LP, a leading technology-focused private equity firm founded by Marcus Elliston (Founder & Managing Partner) and co-led by Priya Narasimhan (Co-Managing Partner & Chief Investment Officer). The general partner of Fund VI is Solara Fund VI GP LLC, a Delaware limited liability company, which is in turn controlled by Solara Digital GP LLC, the general partner of Solara Digital Infrastructure LP. Solara's principal offices are located at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801, with additional offices in San Francisco, New York, and London.
Across its six flagship funds (Funds I through VI), Solara manages assets under management ("AUM") of approximately $38 billion and has completed over 40 platform investments and more than 120 add-on acquisitions since inception, with a focus on enterprise software, cloud infrastructure, data analytics, and cybersecurity. Fund VI currently holds 14 platform investments across Funds IV, V, and VI, as described in further detail in Section V.B below.
Target. 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 maintains its US headquarters at 600 Townsend Street, Suite 800, San Francisco, California 94103. Cloudium's shares of common stock are listed on the Nasdaq Global Select Market under the ticker symbol "CLDM."
Cloudium is a provider of cloud-native enterprise resource planning, customer relationship management, and business intelligence SaaS solutions, serving mid-market and enterprise customers globally. Cloudium reported last-twelve-months ("LTM") revenue of approximately $1,620,000,000 for the fiscal year ended September 30, 2023, and annual recurring revenue ("ARR") of approximately $1,740,000,000 as of December 31, 2023. The company employs approximately 6,800 employees worldwide, with significant operations in the United States, the United Kingdom, India, and Germany.
Cloudium's key subsidiaries include: (i) Cloudium Technologies UK Ltd. (Company No. 11287456), which generates approximately £312,000,000 (approximately $390,000,000 at current exchange rates) in annual revenue and serves as the principal UK and EMEA operating subsidiary; (ii) Cloudium Technologies India Pvt. Ltd. (Bangalore), which employs approximately 2,400 employees and serves as the company's primary research and development and customer support center; and (iii) Cloudium Solutions GmbH (Berlin), which employs approximately 400 employees and leads the company's DACH region (Germany, Austria, and Switzerland) sales and customer success operations.
Jonathan Hargrove serves as Chief Executive Officer of Cloudium and is a significant shareholder, holding approximately 7,736,400 shares of common stock. Sienna Whitfield serves as Chief Financial Officer. Cloudium's single largest institutional shareholder is Pinnacle Growth Ventures LLC, which holds approximately 21,367,200 shares (approximately 11.6% of outstanding shares).
Merger Subsidiary. Stratos Merger Sub Inc. is a Delaware corporation (Delaware File No. 7923841) that was incorporated on January 8, 2024, for the sole purpose of effectuating the reverse triangular merger contemplated by the Merger Agreement. Stratos Merger Sub Inc. is wholly owned by Fund VI and has no independent operations, assets, or employees.
B. Transaction Structure
The Transaction is structured as a reverse triangular merger under the Delaware General Corporation Law. Specifically, Stratos Merger Sub Inc. will merge with and into Cloudium Technologies plc, with Cloudium surviving the merger as a wholly owned subsidiary of Fund VI. At the effective time of the merger, each outstanding share of Cloudium common stock (other than shares held by Cloudium as treasury shares, shares held by Fund VI or Merger Sub, and shares subject to rollover agreements) will be converted into the right to receive cash consideration of approximately $36.92 per share, without interest, subject to applicable withholding taxes.
The aggregate equity value of the Transaction is $6,800,000,000. The form of consideration is predominantly cash, with the exception of shares subject to rollover agreements as follows:
• Jonathan Hargrove (CEO): Rolling over 50% of his 7,736,400 shares (i.e., 3,868,200 shares), representing rollover equity of approximately $142,814,544 at the per-share consideration of $36.92.
• Pinnacle Growth Ventures LLC: Rolling over 60% of its 21,367,200 shares (i.e., 12,820,320 shares), representing rollover equity of approximately $473,241,408 at the per-share consideration of $36.92.
• Total rollover equity: Approximately $616,055,952.
The total funding requirement for the Transaction is approximately $7,188,944,048, comprised of: (i) cash merger consideration payable to non-rolling shareholders of approximately $6,183,944,048; (ii) estimated transaction expenses of approximately $185,000,000 (including legal, advisory, financing, and regulatory fees); and (iii) repayment of approximately $820,000,000 in existing Cloudium indebtedness to Atlas Commercial Lending Corp. under Cloudium's current credit facility, which is required to be repaid in full at or prior to closing pursuant to the terms of the Merger Agreement.
The sources of funding for the Transaction are as follows:
• Debt financing: $3,740,000,000 Term Loan B facility and $500,000,000 Revolving Credit Facility (undrawn at closing), arranged by Meridian Atlantic Bank, N.A. (lead arranger) and Ironclad Capital Markets LLC (co-arranger), pursuant to a commitment letter dated January 18, 2024. The definitive credit agreement is expected to be executed on or prior to closing.
• Equity contribution: $2,832,888,096 equity contribution from Fund VI, funded by limited partner capital calls in accordance with the Fund VI limited partnership agreement.
• Rollover equity: Approximately $616,055,952 in rollover equity contributed by Jonathan Hargrove and Pinnacle Growth Ventures LLC.
C. Signing and Anticipated Timeline
The Merger Agreement was executed on January 22, 2024. The Transaction was publicly announced on January 23, 2024, through a joint press release issued by Solara and Cloudium and through the filing of a Current Report on Form 8-K by Cloudium with the U.S. Securities and Exchange Commission.
The anticipated regulatory and transactional timeline is as follows:
• HSR Filing: Target filing date of approximately February 9, 2024, which allows approximately two weeks from the date of this memorandum for document collection, form preparation, internal review, and coordination with Cloudium's counsel.
• Initial HSR Waiting Period Expiration: Approximately March 11, 2024 (30 calendar days following the filing date, assuming timely payment of the filing fee and acceptance of both Notification Forms by the FTC Premerger Notification Office).
• Outside Date: June 30, 2024, as set forth in Section 8.1(b) of the Merger Agreement. The outside date is subject to a three-month extension in the event of a Second Request or other material regulatory delay.
• UK CMA Filing: A separate merger notification to the UK Competition and Markets Authority ("CMA") is planned for submission on approximately February 12, 2024 (CMA Case No. ME/7184/24). The CMA filing is being coordinated with Albright & Kerr LLP (London), our co-counsel on UK competition matters, led by Fiona McAllister.
Additional regulatory filings in other jurisdictions have been assessed and are addressed in Section VI.F below and in the separate memoranda referenced in Appendix C.
III. HSR Act Reportability Analysis
A. Statutory Framework
Section 7A of the Clayton Act, codified at 15 U.S.C. § 18a, and commonly referred to as the HSR Act, requires that parties to certain acquisitions of voting securities, assets, or interests in non-corporate entities file premerger notification with both the Federal Trade Commission ("FTC") and the Antitrust Division of the U.S. Department of Justice ("DOJ") and observe a statutory waiting period before consummating the transaction. The HSR Act was enacted in 1976 as Title II of the Hart-Scott-Rodino Antitrust Improvements Act, and its implementing regulations are set forth at 16 C.F.R. Parts 801 through 803.
Three requirements must be satisfied for the HSR Act's notification and waiting period requirements to apply to a particular acquisition: (1) the commerce requirement (i.e., one or both parties must be engaged in commerce or in any activity affecting commerce within the meaning of the statute); (2) the size-of-transaction test (i.e., the value of the voting securities, assets, or non-corporate interests to be acquired must exceed the applicable dollar threshold, as adjusted annually); and (3) the size-of-person test (i.e., if the size of the transaction falls between specified threshold levels, at least one party must meet certain minimum asset or revenue thresholds). Each of these requirements is analyzed below.
B. Commerce Requirement
The HSR Act applies to acquisitions where either the acquiring person or the acquired person is "engaged in commerce or in any activity affecting commerce." 15 U.S.C. § 18a(a)(1). This requirement is broadly construed and is satisfied where either party has activities in or affecting U.S. interstate or foreign commerce.
Cloudium Technologies plc is engaged in commerce in the United States. Cloudium derives substantial revenue from its cloud-native ERP, CRM, and BI SaaS solutions sold to U.S. customers. Cloudium maintains its U.S. headquarters in San Francisco, California, employs a significant portion of its approximately 6,800 global employees in the United States, and reported LTM revenue of $1,620,000,000 for the fiscal year ended September 30, 2023, a material portion of which is derived from U.S. operations. Cloudium's ARR as of December 31, 2023 was approximately $1,740,000,000. Cloudium is listed on the Nasdaq Global Select Market and files periodic reports with the SEC. There can be no doubt that Cloudium is engaged in commerce within the meaning of the HSR Act.
Solara Digital Infrastructure LP, through its portfolio companies across Funds IV through VI (encompassing 14 platform investments), is likewise engaged in U.S. commerce. Solara's principal offices are in Wilmington, Delaware, and its portfolio companies operate predominantly in the United States.
Accordingly, the commerce requirement is satisfied.
C. Size-of-Transaction Test
Under 16 C.F.R. § 801.10, the size of the transaction is measured by the aggregate total amount of voting securities and assets of the acquired person that the acquiring person will hold as a result of the consummation of the acquisition. For a merger or consolidation, the value is determined by the value of all voting securities and assets of the acquired entity.
The HSR Act's size-of-transaction thresholds are adjusted annually by the FTC in accordance with changes in the U.S. gross national product. For calendar year 2024, the applicable minimum size-of-transaction threshold is $111.4 million (as adjusted). Any acquisition resulting in the acquiring person holding voting securities and/or assets of the acquired person valued in excess of this threshold is subject to reporting (provided the other requirements are met).
The Transaction is valued at $6,800,000,000 — a figure that exceeds the applicable 2024 size-of-transaction threshold of $111.4 million by more than sixty times. The size-of-transaction test is unambiguously satisfied.
D. Size-of-Person Test
The size-of-person test under the HSR Act requires that, for transactions valued between $111.4 million and $445.5 million (as adjusted for 2024), at least one party to the transaction have total assets or annual net sales of at least $222.7 million (as adjusted for 2024) and the other party have total assets or annual net sales of at least $22.3 million (as adjusted for 2024).
Critically, for transactions valued at more than $445.5 million (the 2024 adjusted threshold), the size-of-person test does not apply. Because the Transaction is valued at $6,800,000,000, which far exceeds the $445.5 million threshold, the size-of-person test is inapplicable and need not be satisfied for reporting purposes.
However, for completeness and to ensure a thorough record, we note that both parties would satisfy the size-of-person test even if it were applicable:
• Solara (Acquiring Person): Through Fund VI and SDILP, Solara has total assets under management of approximately $38 billion across its six flagship funds. Fund VI alone has $12.4 billion in committed capital. These figures substantially exceed the $222.7 million threshold applicable to the larger party.
• Cloudium (Acquired Person): Cloudium reported total assets well in excess of the $22.3 million minimum threshold, as reflected in its most recently filed Annual Report on Form 20-F with the SEC for the fiscal year ended September 30, 2023.
We have confirmed that the 2024 adjusted thresholds, as published by the FTC in the Federal Register, are the applicable thresholds for purposes of this Transaction.
E. Identification of Filing Persons
The HSR Act and its implementing regulations require the identification of the "ultimate parent entity" (UPE) of each "person" that is party to the transaction. The "acquiring person" and the "acquired person" are each defined by reference to their respective UPEs and all entities controlled by such UPEs. See 16 C.F.R. § 801.1.
Acquiring Person — UPE Determination. The acquiring entity in the Transaction is Stratos Merger Sub Inc. To determine the UPE for HSR filing purposes, we trace the chain of control upward from Merger Sub through each intermediate entity:
1. Stratos Merger Sub Inc. (Delaware corporation) — wholly owned by Fund VI.
2. Solara Digital Infrastructure Fund VI LP (Delaware limited partnership) — controlled by its general partner, Solara Fund VI GP LLC.
3. Solara Fund VI GP LLC (Delaware LLC) — controlled by Solara Digital GP LLC.
4. Solara Digital GP LLC (Delaware LLC) — serves as the general partner of Solara Digital Infrastructure LP.
5. Solara Digital Infrastructure LP (Delaware limited partnership) — this is the entity at the top of the control chain that is not itself controlled by any other entity.
Under 16 C.F.R. § 801.1(a)(3), the UPE is "an entity which is not controlled by any other entity." Solara Digital Infrastructure LP meets this definition: it is the ultimate holding entity for the Solara platform, and no other entity holds a controlling interest in it. Accordingly, Solara Digital Infrastructure LP is the UPE of the acquiring person for purposes of the HSR filing.
The HSR Notification Form filed by the acquiring person must report the holdings and operations of all entities within the Solara Digital Infrastructure LP "person," including all entities controlled by SDILP across all fund vehicles. This includes, notably, the 14 platform investments across Funds IV, V, and VI, which must be assessed for competitive overlap with the Target.
Acquired Person — UPE Determination. Cloudium Technologies plc is a publicly traded company listed on the Nasdaq Global Select Market with no controlling shareholder. Under the HSR regulations, a publicly traded company with no single controlling entity is itself treated as its own UPE. See 16 C.F.R. § 801.1(a)(1). Accordingly, Cloudium Technologies plc is the UPE of the acquired person.
Both UPEs — Solara Digital Infrastructure LP and Cloudium Technologies plc — must file Notification and Report Forms with the FTC and DOJ.
F. Filing Fee
The Merger Litigation Reform Act of 2022 (the "2022 Fee Act") revised the HSR filing fee schedule to establish tiered fees based on the value of the transaction. For calendar year 2024, the applicable fee tiers (as adjusted pursuant to FTC guidance) are as follows:
Based on the Transaction's deal value of $6,800,000,000, the applicable HSR filing fee is $2,250,000 (for transactions valued at $5 billion or more but less than $10 billion).
Pursuant to Section 9.3 of the Merger Agreement, the HSR filing fee is allocated to Solara (as buyer) as a component of transaction expenses. The filing fee must be paid at the time the HSR Notification Form is submitted to the FTC Premerger Notification Office.
IV. Item 4(c) and 4(d) Document Review
A. Item 4(c) Documents
Item 4(c) of the HSR Notification and Report Form requires the production of all documents that were prepared by or for any officer(s) or director(s) of the filing person (or, in the case of an unincorporated entity, individuals exercising similar functions) for the purpose of evaluating or analyzing the acquisition with respect to market shares, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets.
For the acquiring person, this requirement encompasses documents prepared by or for the officers, directors, or managing members of any entity in the control chain, including the general partners of Fund VI and SDILP, as well as investment committee members who approved or evaluated the Transaction. Specifically, the following categories of documents must be collected and reviewed for responsiveness to Item 4(c):
• Investment committee memoranda prepared in connection with Fund VI's evaluation and approval of the Cloudium acquisition, to the extent such memoranda discuss market shares, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets.
• Board presentations, pitch books, and other materials prepared by or for Osprey Bancroft & Co. (Damien Harlow, Managing Director, Technology M&A), the buyer's financial advisor, that contain competitive analysis, market share data, or competitive positioning of Cloudium relative to its competitors.
• Internal strategy documents and presentations prepared by or for Solara's deal team or investment committee that analyze Cloudium's competitive position in the cloud ERP, CRM, and BI SaaS markets.
• Any correspondence, memoranda, or analyses shared between Solara and its advisors (financial, strategic, or otherwise) that discuss the competitive landscape in which Cloudium operates, including references to market concentration, competitive dynamics, barriers to entry, or market trends relevant to the Transaction.
We recommend initiating a targeted document collection immediately, focusing on materials held by or prepared for Marcus Elliston (Founder & Managing Partner), Priya Narasimhan (Co-Managing Partner & CIO), and any other Fund VI investment committee members who participated in the approval of the Transaction. In addition, we recommend collecting all deal-team presentations and communications with Osprey Bancroft & Co. that reference market competition, competitive overlap, or market share analysis.
Each responsive document must be produced as an attachment to the HSR Notification Form. Documents that are subject to foreign language requirements or that contain privileged material must be handled in accordance with the FTC's applicable guidance on privilege and redaction.
B. Item 4(d) Documents
Item 4(d) of the HSR Notification and Report Form requires the production of all studies, surveys, analyses, and reports that were prepared by or for any officer(s) or director(s) of the filing person for the purpose of evaluating or analyzing the acquisition with respect to market shares, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets. Item 4(d) largely overlaps with Item 4(c), but its scope extends specifically to studies, surveys, analyses, and reports — a category that captures, among other things, market studies commissioned from third-party consultants, internal competitive benchmarking analyses, and data-driven assessments of market position.
For the acquiring person, the Item 4(d) collection should sweep more broadly to capture any Solara portfolio company competitive analyses that reference the cloud ERP, CRM, or BI markets. While this is a broader undertaking, it is important to ensure completeness, particularly given the FTC's increasing scrutiny of document production in HSR filings and its willingness to issue warning letters for incomplete or deficient Item 4(c)/4(d) productions.
We note that the FTC's revised HSR Notification Form, which was the subject of extensive rulemaking proceedings during 2023, may impose additional narrative and document production requirements upon its effectiveness. However, for filings expected to be submitted in February 2024, we anticipate that the currently effective form will apply. We will monitor for any interim updates or accelerated effective dates and will adjust our filing preparation accordingly.
Our recommendation is to complete the Item 4(c) and 4(d) document review by February 1, 2024, with partner-level review of all responsive documents to be completed by February 5, 2024, in advance of the target filing date.
V. Substantive Competitive Analysis
A. Cloudium's Market Position
Cloudium Technologies plc is a provider of cloud-native enterprise software solutions across three principal product categories: enterprise resource planning (ERP), customer relationship management (CRM), and business intelligence (BI). Cloudium's solutions are delivered exclusively through a SaaS model, and the company's product suite is designed to serve mid-market and enterprise customers across a range of industries, including financial services, healthcare, manufacturing, government, and technology.
Cloudium's key financial and operational metrics are as follows:
• LTM Revenue (FYE September 30, 2023): $1,620,000,000
• Annual Recurring Revenue (as of December 31, 2023): $1,740,000,000
• LTM EBITDA (FYE September 30, 2023): $405,000,000
• Employees (global): approximately 6,800
• Key geographies: United States (headquarters: San Francisco, CA), United Kingdom (subsidiary: Cloudium Technologies UK Ltd., Company No. 11287456; annual revenue: £312,000,000 / ~$390,000,000), India (subsidiary: Cloudium Technologies India Pvt. Ltd., Bangalore; ~2,400 employees, R&D and support), and Germany (subsidiary: Cloudium Solutions GmbH, Berlin; ~400 employees, DACH region sales)
Among Cloudium's key customer relationships is Aegis Federal Solutions Inc., a U.S. government contractor, which accounts for approximately $84,000,000 in ARR and represents Cloudium's single largest customer concentration. While this relationship is material from a revenue perspective, it is not expected to raise substantive antitrust concerns.
Cloudium competes in large, fragmented, and highly competitive global markets for cloud-based enterprise software. Based on third-party market reports (including those published by industry analysts), Cloudium's market share in the overall cloud ERP market is estimated in the low-to-mid single digits globally. Cloudium's CRM and BI offerings similarly represent relatively modest shares of their respective addressable markets, which are dominated by large, well-resourced incumbents.
B. Solara's Portfolio — Competitive Overlap Assessment
Solara Digital Infrastructure LP's investment thesis centers on enterprise software, cloud infrastructure, data analytics, and SaaS platforms. Across its active fund vehicles (Funds IV, V, and VI), Solara holds 14 platform investments, each with its own distinct product focus and customer base.
We have conducted a preliminary assessment of each Solara portfolio company for horizontal competitive overlap with Cloudium's cloud ERP, CRM, and BI product categories. This assessment involved a review of each portfolio company's product descriptions, revenue mix, customer segments, and market positioning, drawing on publicly available information, internal Solara materials, and discussions with the Solara deal team.
Our preliminary findings are as follows:
• The majority of Solara's existing portfolio companies are focused on cloud infrastructure (IaaS/PaaS), data analytics and data management, and cybersecurity — product categories that are functionally distinct from Cloudium's application-layer ERP, CRM, and BI SaaS offerings.
• We have not identified any portfolio company that directly competes with Cloudium in the provision of cloud-native ERP, CRM, or BI software to mid-market or enterprise customers. None of Solara's portfolio companies markets a product that would be considered a substitute for Cloudium's core SaaS offerings.
• Certain Solara portfolio companies operate in adjacent or complementary markets — for example, cloud infrastructure platforms that may serve as hosting environments for application-layer SaaS providers (including Cloudium or its competitors), or data analytics tools that may be used alongside ERP or BI solutions. However, these adjacencies do not constitute horizontal competitive overlap within the meaning of the antitrust agencies' analytical frameworks.
• We have identified some potential vertical relationships between Solara portfolio companies and Cloudium (e.g., infrastructure or data services that may be purchased by or sold to Cloudium or its competitors). These relationships are addressed in Section V.E below.
Based on this preliminary assessment, we conclude that there is no meaningful horizontal competitive overlap between Cloudium and any current Solara portfolio company in the cloud ERP, CRM, or BI product markets. This conclusion is subject to refinement as the Item 4(c)/4(d) document collection proceeds and additional information is obtained from Solara's investment team.
C. Relevant Product Markets
For purposes of antitrust analysis, we have identified the following potentially relevant product markets in which Cloudium operates:
Cloud ERP. Cloud-native enterprise resource planning software delivered as a service. The cloud ERP market is large and growing, driven by ongoing enterprise migration from on-premises legacy systems to cloud-based platforms. The market is characterized by significant fragmentation, with a wide range of competitors spanning large multinational software companies, mid-tier specialized providers, and emerging pure-play cloud ERP vendors. Cloudium's estimated market share in the overall cloud ERP market is in the low-to-mid single digits globally, based on third-party market sizing reports. The market is intensely competitive, with constant innovation and frequent new market entry.
Cloud CRM. Cloud-based customer relationship management platforms encompassing sales automation, marketing automation, customer service, and related functionality. The cloud CRM market is highly competitive and is dominated by large, entrenched incumbents with substantial market share. Cloudium is a secondary participant in the cloud CRM space, with its CRM offering primarily targeted at mid-market customers and often sold as a complement to its core ERP platform. Cloudium's share of the overall cloud CRM market is estimated to be in the low single digits.
Cloud BI / Business intelligence. Cloud-delivered business intelligence and analytics tools, including reporting, dashboarding, data visualization, and advanced analytics. The cloud BI market is characterized by a wide array of both pure-play BI vendors and integrated platform providers that bundle BI capabilities with broader enterprise software suites. Cloudium's BI offering is frequently bundled with its ERP and CRM products, and the company competes with a large number of well-funded competitors in this space.
In none of these product markets does the Transaction result in a material increase in market concentration or raise concerns about anticompetitive effects. The acquiring person does not currently operate in any of these markets through its existing portfolio companies.
D. Relevant Geographic Markets
The markets for cloud ERP, CRM, and BI SaaS solutions are global in nature. Customers procure cloud-based enterprise software from vendors without regard to the vendor's physical location, and the leading competitors in these markets serve customers worldwide. Accordingly, the relevant geographic market for each product category is best understood as global, or at a minimum, as encompassing the United States, the European Union, the United Kingdom, and other major developed markets.
Cloudium's key geographies for revenue generation include the United States, the United Kingdom, and the DACH region (Germany, Austria, and Switzerland), as well as India (which serves primarily as an R&D and customer support hub rather than a primary revenue market).
We have not identified any geographic concentration concerns arising from the Transaction. The Transaction does not eliminate a competitor in any geographic market, nor does it create a dominant position in any national or regional market.
E. Vertical and Conglomerate Effects
As noted in Section V.B, certain Solara portfolio companies operate in cloud infrastructure and data analytics markets that may have customer or supplier relationships with Cloudium or its competitors. We have assessed these relationships for potential vertical or conglomerate competitive effects and offer the following observations:
• Vertical foreclosure/input raising: We have not identified any Solara portfolio company that supplies a critical or essential input to Cloudium's competitors, or that purchases a significant volume of output from Cloudium's competitors, such that the Transaction could enable a strategy of foreclosure or input cost-raising. The cloud infrastructure and data analytics markets in which Solara's portfolio companies operate are themselves highly competitive, with numerous alternative suppliers available to any market participant.
• Bundling and tying (conglomerate effects): The Transaction does not combine complementary products in a manner that would enable anticompetitive bundling or tying. Cloudium's application-layer SaaS offerings and Solara's portfolio companies' infrastructure and data services are sold to distinct customer segments through distinct distribution channels, and there is no commercially plausible bundling or tying strategy that would result from the Transaction.
We conclude that no vertical or conglomerate competitive concerns arise from the Transaction.
F. Assessment of Second Request Risk
Based on the foregoing analysis, we assess the risk that the FTC or DOJ will issue a Second Request in connection with the Transaction as low. Our assessment is grounded in the following considerations:
1. Financial-sponsor acquisition. The Transaction is a financial-sponsor (private equity) acquisition, not a strategic acquisition by a direct competitor. The acquiring person does not itself operate in the cloud ERP, CRM, or BI markets, and the Transaction does not eliminate a horizontal competitor.
2. No material horizontal overlap. We have not identified any material horizontal competitive overlap between Cloudium's product offerings and those of any current Solara portfolio company. The absence of horizontal overlap is the most significant factor in our assessment, as horizontal overlaps are the primary driver of agency concern in merger review.
3. Fragmented, competitive markets. The cloud ERP, CRM, and BI markets are large, growing, and highly fragmented, with numerous competitors of varying sizes and significant ongoing innovation and entry. The Transaction does not result in any meaningful increase in market concentration.
4. Historical agency practice. The FTC and DOJ have historically been less likely to issue Second Requests in PE acquisitions absent clear horizontal overlap, evidence of a pattern of serial acquisitions in the same space (so-called "roll-up" concerns), or other specific competitive issues. We are not aware of any prior Solara acquisitions in the cloud ERP, CRM, or BI markets that would raise roll-up concerns.
Notwithstanding our overall assessment of low Second Request risk, we note that the antitrust agencies have exhibited increased scrutiny of private equity acquisitions in the technology sector in recent years, consistent with broader enforcement priorities articulated by the current FTC and DOJ leadership. In light of this heightened environment, we recommend preparing robust Item 4(c)/4(d) document production and a clear narrative — through a voluntary supplemental submission — to proactively address any potential agency concerns and facilitate efficient review. These recommendations are elaborated in Section VI below.
VI. Filing Strategy and Recommendations
A. Timing
We recommend filing the HSR Notification and Report Form on or about February 9, 2024. This target date allows approximately two weeks from the date of this memorandum for document collection, form preparation, internal review, and coordination with Cloudium's counsel (Ridgeway Phelps & Sato LLP).
The initial 30-day waiting period under Section 7A(b)(1)(B) of the Clayton Act begins on the date both Notification Forms are filed and the applicable filing fee is paid. Assuming filing on February 9, 2024, the initial waiting period would expire on approximately March 11, 2024 (30 calendar days later). If neither the FTC nor the DOJ issues a Second Request within the initial waiting period, regulatory clearance under the HSR Act is obtained upon expiration.
With respect to early termination of the waiting period, we note that the FTC suspended the practice of granting early termination of the HSR waiting period in February 2021, and as of the date of this memorandum, the FTC has not reinstated this practice. Accordingly, we do not recommend relying on early termination as a component of the timeline. However, we will continue to monitor for any change in FTC practice and will request early termination if the opportunity becomes available.
In the unlikely event that a Second Request is issued, the timeline for obtaining clearance could extend significantly — typically six to twelve months or longer from the date of issuance, depending on the scope and complexity of the request and the pace of compliance and agency review. The Merger Agreement's outside date of June 30, 2024 includes a three-month extension provision (to September 30, 2024) in the event of a Second Request or other material regulatory delay. While we assess Second Request risk as low, the deal team should be aware of this contingency.
B. Filing Preparation
The following filing preparation steps are recommended:
Document Collection. We should initiate immediate collection of Item 4(c) and 4(d) documents from the following sources:
• Solara investment committee members, including Marcus Elliston (Founder & Managing Partner), Priya Narasimhan (Co-Managing Partner & CIO), and all other individuals who participated in the evaluation or approval of the Transaction.
• Osprey Bancroft & Co. (Damien Harlow, MD, Technology M&A), the buyer's financial advisor, with respect to all pitch books, market studies, competitive analyses, and other materials prepared for or provided to Solara in connection with the Transaction.
• Any other members of the Solara deal team or Fund VI advisory board who may have received or prepared documents responsive to Item 4(c) or 4(d).
Form Preparation. Andrew Fitzpatrick (working associate, antitrust team) and the Calderwood & Harkness antitrust team will prepare a draft HSR Notification and Report Form for the acquiring person, including all required attachments (organizational charts, revenue data by NAICS codes, descriptions of minority holdings, and prior acquisitions within the past five years). Partner-level review by Elaine Forsythe is targeted for February 5, 2024.
Revenue Data. We will need to obtain Cloudium's NAICS-code-level U.S. revenue data in order to complete both the acquiring person's and the acquired person's Notification Forms. We have requested this data from Cloudium's counsel, Ridgeway Phelps & Sato LLP (Catherine Answorth, Lead M&A Partner; Robert Tillman, Lead Antitrust Partner, Washington, DC), and from Cloudium's Chief Financial Officer, Sienna Whitfield. We anticipate receiving this data by January 31, 2024.
Coordination with Target's Filing. Under the HSR Act, both the acquiring and acquired persons must file Notification Forms. Cloudium, as the acquired person, must file its own Notification Form, which will be prepared by Ridgeway Phelps & Sato LLP. We will coordinate with Robert Tillman to ensure that both Notification Forms are filed simultaneously on or about February 9, 2024, as the 30-day waiting period does not begin until both forms have been filed and the filing fee has been paid.
C. Voluntary Submissions
We recommend preparing and submitting a voluntary supplemental submission (commonly referred to as a "white paper") to the reviewing agency (FTC or DOJ) at or shortly after the filing date. The purpose of this submission is to proactively address any potential competitive concerns and to facilitate efficient agency review of the Transaction.
The voluntary submission would emphasize the following points:
(i) The financial-sponsor nature of the acquisition and the absence of any direct competitive relationship between the acquirer and the target.
(ii) The absence of horizontal competitive overlap between Cloudium's cloud ERP, CRM, and BI products and the products or services offered by any existing Solara portfolio company.
(iii) The highly competitive and fragmented nature of the cloud ERP, CRM, and BI markets, supported by publicly available market data, third-party analyst reports, and customer testimonials (to the extent available).
(iv) The pro-competitive benefits of the Transaction, including planned investment in Cloudium's research and development capabilities, acceleration of product development timelines, geographic expansion into underserved markets, and enhancement of customer service and support infrastructure.
We recommend delivering the voluntary submission to FTC staff approximately one to two weeks after the filing date, with a target delivery date of approximately February 20, 2024. This timing allows the reviewing agency sufficient time to receive and process the Notification Forms before engaging with supplemental materials.
D. Agency Clearance Process
Merger reviews under the HSR Act are allocated between the FTC and DOJ through an internal clearance process. The two agencies negotiate the allocation of specific industries and transactions to avoid duplication of effort. Given Cloudium's technology sector focus, the Transaction may be reviewed by either agency. Historically, the FTC has reviewed a significant number of technology-sector mergers, although the DOJ has also been active in this space.
We will monitor the clearance process closely. Once the reviewing agency has been identified, we will engage in preliminary outreach as appropriate, including through the voluntary submission described above, to facilitate a constructive and efficient review.
E. Coordination with UK CMA Filing
As noted above, a separate merger notification is required to the UK Competition and Markets Authority. The CMA Merger Notice Form (anticipated CMA Case No. ME/7184/24) is planned for submission on approximately February 12, 2024, three days after the target HSR filing date. The CMA filing is being coordinated by Albright & Kerr LLP (Fiona McAllister, London) in conjunction with Calderwood & Harkness's London office (One Bartholomew Close, London EC1A 7BL).
Based on our preliminary assessment of the UK competitive landscape, we anticipate that the CMA review will proceed under Phase 1 and result in unconditional clearance. Cloudium's UK subsidiary, Cloudium Technologies UK Ltd., generates significant UK revenue (approximately £312,000,000 annually), which triggers the CMA's jurisdictional threshold for review.
We will coordinate the U.S. and UK filing timelines to ensure consistency between the two submissions and to avoid any inconsistencies in market definitions, competitive narratives, or factual representations. Alignment between the HSR and CMA filings is particularly important given the agencies' established practice of cross-border cooperation and information sharing in merger review.
F. Other Jurisdictions
We have assessed the Transaction's filing obligations in all potentially relevant jurisdictions. The results of these assessments, which are set forth in separate memoranda previously circulated to the deal team, are summarized below for convenience:
• European Union (EU Merger Regulation): No EU Merger Regulation filing is required. Cloudium's EU revenues fall below the applicable EU turnover thresholds for mandatory notification under the EU Merger Regulation (Council Regulation (EC) No. 139/2004). See separate memorandum dated December 3, 2023.
• European Union (Foreign Subsidies Regulation): No EU Foreign Subsidies Regulation ("FSR") notification is triggered in connection with the Transaction. See separate memorandum dated December 3, 2023.
• Germany (FDI Screening under AWV): No German foreign direct investment notification obligation arises under the Außenwirtschaftsverordnung ("AWV"). Cloudium Solutions GmbH does not operate in a sensitive sector as defined under the AWV, and the Transaction does not involve the acquisition of a German critical infrastructure company or a company operating in sensitive technology areas. See separate memorandum dated December 8, 2023.
• India (CCI Filing): No filing is required with the Competition Commission of India ("CCI"). Cloudium Technologies India Pvt. Ltd.'s turnover falls below the applicable filing threshold under the Competition Act, 2002. See separate memorandum dated December 10, 2023.
• CFIUS (Committee on Foreign Investment in the United States): A voluntary CFIUS notice is not recommended. Cloudium does not constitute a "TID U.S. business" (i.e., a business that produces, designs, tests, manufactures, fabricates, or develops critical technologies, is involved in critical infrastructure, or maintains or collects sensitive personal data of U.S. citizens) within the meaning of the applicable regulations, and the Transaction does not involve covered real estate. See separate memorandum dated November 30, 2023.
In summary, the only mandatory pre-closing merger control filings required in connection with the Transaction are (i) the HSR notification in the United States and (ii) the CMA merger notification in the United Kingdom.
VII. Action Items and Next Steps
The following table sets forth the key action items, responsible parties, and target dates for HSR filing preparation and submission:
We will circulate updates to the deal team on a weekly basis during the pendency of the HSR waiting period and will provide immediate notification of any agency communication, including requests for additional information or a Second Request (in the unlikely event one is issued).
VIII. Conclusion
Based on the analysis set forth in this memorandum, we reach the following conclusions:
1. The acquisition of Cloudium Technologies plc by Solara Digital Infrastructure Fund VI LP is reportable under the HSR Act.
2. Both the size-of-transaction test and the size-of-person test (to the extent applicable) are clearly satisfied. The Transaction's $6,800,000,000 deal value far exceeds the applicable 2024 thresholds.
3. The filing person (UPE) on the buyer side is Solara Digital Infrastructure LP. The filing person (UPE) on the target side is Cloudium Technologies plc.
4. The substantive antitrust risk presented by the Transaction is assessed as low. There is no material horizontal competitive overlap between Cloudium's cloud ERP, CRM, or BI product offerings and those of any current Solara portfolio company. The Transaction is a financial-sponsor acquisition in fragmented, highly competitive markets.
5. The risk of a Second Request is assessed as low, based on the absence of horizontal overlap, the financial-sponsor nature of the Transaction, and historical agency practice in comparable situations.
6. We recommend filing the HSR Notification and Report Form on or about February 9, 2024, with anticipated clearance upon expiration of the initial 30-day waiting period on or about March 11, 2024.
7. We recommend preparing a voluntary supplemental submission to the reviewing agency to proactively address any potential competitive concerns and facilitate efficient review.
We will continue to coordinate with Harrison Wexford and the broader deal team on timing and filing logistics, and with Albright & Kerr LLP (Fiona McAllister) on the parallel UK CMA review process. We are available to discuss any aspect of this memorandum at your convenience.
Appendix A — Entity / Control Chain Diagram (for UPE Determination)
The following diagram illustrates the chain of control for purposes of determining the ultimate parent entity of the acquiring person under the HSR Act:
Solara Digital Infrastructure LP (UPE — Delaware limited partnership)
↓ controls (as limited partnership controlled by its general partner)