In what could be the third largest deal in the history of U.S. technology, IBM will be acquiring open-source software company Red Hat for $34 billion. The combined entity could potentially emerge as the next behemoth in cloud computing – one of the most in-demand services today.
IBM will pay in cash to buy all shares in Red Hat at $190 each. IBM is advised by Goldman Sachs, J.P. Morgan and Lazard, while Red Hat is advised by Morgan Stanley and Guggenheim on the deal. If the deal passes regulatory and shareholder approvals, Red Hat’s operations will become a part of IBM’s Hybrid Cloud division. The deal might close in second half of next year.
Cloud technology essentially provides services such as data storage, database management, networking, access to servers access , software solutions, analytics, intelligence and more via the internet. Dropbox, Flickr, Google Drive, Netflix, Microsoft Office 365 and Yahoo Mail are examples of cloud services.
IBM-Red Hat merger is expected to help businesses/users have a smoother transition or transfer of data between different cloud platforms, and to keep users' data secure irrespective of which cloud technologies they use.
This year saw several other major acquisitions in the open source space. Microsoft acquired code-sharing platform GitHub for $7.5 billion. Salesforce bought Mulesoft (a firm that helps to collate different software applications, data and devices) for $6.5 billion. Also, Cloudera and Hortonworks announced a $5.2 billion deal to merge.
According to IBM and Red Hat, their deal would be the "most significant tech acquisition of 2018." .In recent times, IBM signed cloud contracts with Economical Insurance, ExxonMobil and Novis. What’s more, Red Hat is in partnerships with major cloud players including Amazon, Microsoft and Google - that means, following the IBM-Red Hat deal, IBM might be offering solutions to its current competitors as well.
IBM's CFO Jim Kavanaugh told investors earlier this month that its cloud business raked in $19 billion in revenue , which is more than 20% from the same time last year. Its acquisition of Red Hat (IBM's largest deal ever) could potentially bolster its cloud solutions even more.