Ernst sell-off gets green light.

The European Commission has approved the acquisition of Ernst & Young’s global consulting and IT activities by French-based Cap Gemini.

Although the operation will reinforce Cap Gemini’s position as a global consulting and IT services provider, the Commission said the market will remain fragmented, rapid growing and driven by technological innovation.

The Commission concluded the merger would not create a dominant position in Europe.

Analysis of the deal focused on the market for the provision of IT services and notably on the consulting segment.

Officials concluded that Cap Gemini and E&Y largely complement each other geographically since Cap Gemini’s practice is chiefly based in Europe and E&Y’s strength lies in North America.

The Commission also said the two complemented each other in their activities; E&Y is seen as strong in general consulting while Cap Gemini’s strength is more in the IT field.

‘The transaction brings about minor overlaps in a very dynamic and competitive market where customers have considerable leverage to play one supplier against another,’ officials said.

‘There are no indications the operation could alter this present situation significantly. In view of relatively low combined market shares, and the presence of strong existing and potential competition in all markets considered, the Commission decided not to oppose this operation and to declare it compatible with the common market and with the European Economic Agreement,’ a spokesman added.

The deal will create the world’s biggest IT consultancy, with 58,000 employees and annual revenue of nearly ff8bn. E&Y partners will be left with around 36% of the combined group. The firm has agreed with the Securities and Exchange Commission, the powerful US regulator, to sell Cap Gemini shares held collectively by the firm or by audit, tax and corporate partners within five years.

A poll of E&Y partners is understood to have given an almost unanimous go-ahead to the decision.

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