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IBM gives up on Schlumberger Ireland buyout

Competition Authority intervenes

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IBM has decided against buying the Irish arm of disaster recovery company Schlumberger, following a decision by the Competition Authority to block the deal.

Although IBM could elect to slog it out in the courts with the Competition Authority, it has decided to simply exclude Schlumberger's Irish operation from a global €200m deal that should strengthen IBM's position in the disaster recovery business in Europe. Citing representatives from IBM, the Irish Times reported today that the long delay that would likely be part of an appeals process has prompted the firm to pass on buying Schlumberger's Irish business.

The paper also notes that the decision by Big Blue leaves the fate of Schlumberger Business Continuity Services (Ireland) Limited up in the air. Without a global presence, the unit may struggle to win contracts with multinationals, although it could represent an attractive opportunity for other disaster recovery specialists or even for Schlumberger Ireland management.

The Competition Authority handed down its decision on the matter over a month ago in what was the first such ruling under merger control legislation introduced in Ireland last year. At the time, the authority said that the takeover would dramatically reduce competition in the Irish disaster recovery market, giving the merged entity an 80 per cent stranglehold on the sector.

Schlumberger Business Continuity Services (Ireland) Limited is the biggest provider of disaster recovery services and "hot seats" in Ireland, accounting for about €10m of a €15m market. IBM is its nearest rival.

Disaster recovery involves the activation of back-up data and computer systems in the event of a fire, flood or other incident that could take a whole office building out of commission. Companies like IBM and Schlumberger keep computer systems warm, so that when a crisis occurs, large firms can keep operating using backed-up data and hot desks, or fully equipped office space that staff can temporarily re-locate to.

In April, the two corporations agreed on a takeover by IBM of all of Schlumberger's disaster recovery sites globally. This deal included the transfer of some 750 clients and 260 employees, which would be folded into IBM Global Services. Schlumberger, a firm involved mainly in energy and natural resources, has been involved in a long process of selling off its non-core assets.

Copyright © 2004, ENN

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