Anticipated acquisition by Verint Systems Inc of Witness Systems Inc

Affected market: Software

No. ME/2933/07

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 22(1) given on 23 May 2007. Full text of decision published 6 June 2007.

Please note that square brackets indicate figures or text which have been deleted or replaced with a range at the request of the parties for reasons of commercial confidentiality.

PARTIES

Verint Systems Inc (Verint) is incorporated in the USA and provides analytical software-based solutions for security and business intelligence purposes. Its 2006 worldwide sales were approximately US$309 million, of which US$[ ] million (approximately £[ ] million) were achieved in the UK. Approximately 57 per cent of Verint's common stock is held by Comverse Technology Inc, which is a provider of software and systems that enable multimedia network based enhanced services.

Witness Systems Inc (Witness) is incorporated in the USA and a provider of workforce optimisation software and services that enable companies to capture customer intelligence and optimise their workforce performance in customer service operations. Its UK turnover for the year ending 31 December 2005 was US$49 million (approximately £25 million).

TRANSACTION

The proposed transaction involves an offer by Verint to purchase the entire issued share capital Witness. The transaction was notified on 14 March 2007 and the 40 working-day administrative deadline expired on 14 May 2007. The transaction has also been notified to the US Department of Justice (DoJ) and the German Federal Cartel Office (FCO). The DoJ granted early termination, that is cleared the case on 9 March 2007 and the FCO cleared the case in Phase I on 10 April 2007.

JURISDICTION

As a result of this transaction Verint and Witness will cease to be distinct. The parties overlap in the supply of interaction management and analysis solutions with a joint share of above 25 per cent and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

THIRD PARTY VIEWS

All but one third party contacted were unconcerned about this transaction. This concern is dealt with throughout the above assessment. All customers were unconcerned, which is particularly probative as it is customers that would bear the brunt of any adverse merger effects on price, innovation or quality.  On the contrary, many respondents, especially customers, commented that they expect the parties to be able to offer a more attractive product portfolio post-merger, which may have motivated the complaining third party. As that complainant is a horizontal competitor, it is unclear that alleged price increases or reduction in innovation or service quality would be detrimental to its interests. Conversely, the threat of a more effective competitor would prompt understandable fear of greater competition. The weight of overall third party views, therefore, provide cogent support in favour of the conclusion that the transaction will not reduce competition.

ASSESSMENT

The parties overlap in the supply of various interaction management and analysis solutions. The OFT has assessed this transaction both on the basis of this wider segment, as well as on the basis of functionality and customer-based sub-segments. Estimates of their combined shares of supply vary, but most data sources estimate them at [30-40] to [40-50] per cent, with one third party estimated the parties' post-merger joint share at [60-70] to [70-80] per cent.

While the transaction involved two of the three current main players in interaction management as a whole and the specific sub-segments, no customer concerns were received. Both the channel partners and large intermediate/end customers will, on the available evidence, be able to leverage a range of supplier options post-merger, which includes NICE, arguably the closest competitor to each party, and if necessary could include expansion by an existing supplier or new entry. Smaller customers have less sophisticated software requirements and will continue to be able to buy from the mid-sized and smaller players. In respect of each class of customers, therefore, the evidence suggests that no anticompetitive merger effects will arise as Verint will continue to face a similar degree of competitive pressure to that prevailing absent the merger. Indeed, there is some evidence from customer views to suggest that the merger may stimulate further competition as Verint will be able to offer a more attractive product portfolio than previously.
 
Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1).

Back to top