IP/07/1443

Brussels, 3rd October 2007

Mergers: Commission opens in-depth investigation into proposed take-over of Telelogic by IBM

The European Commission has opened a detailed investigation under the EU Merger Regulation into the planned acquisition of Telelogic of Sweden by IBM of the US. Both IBM and Telelogic are active in the market for software development tools, that is software used to develop software. The Commission’s preliminary market investigation found that the proposed transaction raises serious doubts as to its compatibility with the Single Market and the European Economic Area (EEA) agreement given the strong market position that IBM would achieve for certain types of software development tools, in particular so-called "software modelling and requirements management" tools. The Commission now has 90 working days (until 20 February 2008) to decide whether the takeover would significantly impede effective competition within the EEA or any substantial part of it. A decision to open an in depth inquiry does not prejudge the final result of the investigation.

Competition Commissioner Neelie Kroes said: “After this transaction IBM would become by far the largest vendor of software development tools for software modelling and for requirements management. It is the Commission’s duty to thoroughly analyse the effects of such a transaction and to ensure that it would not harm competition (in the software development tools sector".

IBM is active worldwide in the development, production and marketing of a variety of information technology (IT) products, software and services. As part of its diverse software activities, IBM develops and sells software development tools. Telelogic is a Swedish software company.

An initial market investigation revealed strong indications that the market for software development tools may be divided into narrower product markets based upon the functions of the relevant tools. The Commission has identified competition concerns with regard to two of these product markets: software modelling and requirements management tools. In these markets IBM and Telelogic are direct competitors and are the leading vendors world-wide. The combination of these two companies could have adverse effects on competition and, inter alia give the merged entity the ability and incentive to slow down innovation and interoperability with tools from third party vendors.

Based on these findings, the Commission decided to open a second phase investigation in order to carry out an in-depth assessment of the effects of the proposed transaction. Modelling tools are designed to help software developers model the software before developing it. The software's functions are mapped out by creating visual models as well as by generating data definitions, programming specifications and ultimately the software code itself. Requirements management tools are designed to streamline and document a development team's analysis of the requirements.

More information on the case will be available at:

http://ec.europa.eu/comm/competition/mergers/cases/index/m94.html#m_4747