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IBM’s $6.4bn Acquisition of HashiCorp

By Enrique Perez-Hernandez, Tarvo Simons, Taha Yassine, Michael Joachim ten Eicken, and Juan Pelaez (IE University), Adam Bernabeu, Mahaut Bonnet de Roovere, Malo Inizan (HEC)

Photo: rivage (Unsplash)


Overview of the deal

Acquirer: International Business Machines Corporation (IBM)

Target: HashiCorp, Inc

Total Transaction Size: $6.4bn

Closed date: Q4 2024

Target advisor: Barclays Capital Inc., JPMorgan Chase & Co. (Financial), Paul, Weiss, Rifkind, Wharton & Garrison LLP (Legal)

Acquirer advisor: Qatalyst Partners, Partners, L.P. (Financial), Wilson Sonsini Goodrich & Rosati, P.C. (Legal)

On April 24, the American multinational technology company IBM announced its intention to acquire the multi-cloud infrastructure company HashiCorp for $35 per share in cash, representing a total transaction of $6.4 billion. This move marks another strategic expansion for IBM, following its acquisitions of Red Hat in 2018 and Apptio in 2023. By integrating HashiCorp's hybrid and multi-cloud lifecycle management products into its portfolio, IBM aims to better assist clients in navigating the complexities of modern AI applications.

IBM's move comes at a time when hybrid cloud and the growing AI are considered two of the most transformational technologies for clients today. Having experienced substantial growth over recent years, HashiCorp, has spent the past twelve years pioneering multi-cloud automation with the mission of empowering cloud practitioners. However, IBM's acquisition aligns with HashiCorp's goals of expanding its reach and broadening its impact. With this acquisition, IBM aims to significantly improve its position and become a leader in the cloud services market.

"HashiCorp has a proven track record of enabling clients to manage the complexity of today's infrastructure and application sprawl. Combining IBM's portfolio and expertise with HashiCorp's capabilities and talent will create a comprehensive hybrid cloud platform designed for the AI era.” Arvind Krishna, CEO (IBM)

Company Details (Acquirer - IBM)

International Business Machines Corporation (IBM) is a U.S.-based company specializing in information technologies. It delivers integrated solutions and services globally, focusing on the hybrid cloud and artificial intelligence (AI) opportunities through a platform-centric approach that combines technology and business expertise. IBM operates through four main segments: Software, Consulting, Infrastructure, and Financing. The company has strategic partnerships with numerous companies, including hyperscalers, service providers, global system integrators, and software and hardware vendors. 

Founded in 1911, headquartered in Armonk, New York (USA) 

CEO: Krishna Arvind

Number of employees: 282,200

Market Cap: $155,271 million 

EV: $199,099 million 

LTM Revenue: $62,069 million 

LTM EBITDA: $14,380 million 

LTM EV/Revenue: 3.2x


Company Details (Target - HashiCorp Inc.)

HashiCorp, Inc. is a multi-cloud infrastructure automation software company. Its software suite enables organisations to adopt consistent workflows and create a system of record for automating cloud infrastructure provisioning, security, networking, and application deployment. HashiCorp’s commercial products include Terraform, Vault, Consul, Nomad, and the HashiCorp Cloud Platform. 

Founded in 2012, headquartered in San Francisco, California (USA)

CEO: David McJannet

Number of employees: 2,200

Market Cap: $6.67 billion

EV: $3.82 billion

LTM Revenue: $498.2 million

LTM EBITDA: $(245.0) million 

LTM EV/Revenue: 9.2x


Projections and Assumptions

Short-term consequences

HashiCorp will become part of IBM Inc as a division inside IBM Software. On the news of the talks between the two companies, Hashicorp's stock increased by 24% reaching a market value of $6.4 billion. On the same day the two companies officially announced the deal, IBM reported its first quarterly revenue that was marginally below estimates. IBM stock lost 8% while HashiCorp shares moved 4% higher.


Both Management teams announced an expected increase in Adjusted EBITDA within the first full year post-closing and free cashflow in the next two years. Despite an Adjusted EBITDA loss of $38.2 million, market analysts expect HashiCorp to experience an 11% increase in revenue in fiscal year 2025 from fiscal year 2024, generating $646 million in revenue. IBM CFO James J. Kavanaugh said that this growth in revenue would be driven by IBM’s global sales force given that 70 % of HashiCorp’s current revenues come from U.S. customers.

The rationale for IBM is to accelerate innovation with an integral hybrid cloud platform system solution –a total addressable market of $1.1 trillion in 2023 - through a combination of each company’s portfolio, expertise, infrastructure, and customer base. HashiCorp’s clients include big companies such as Bloomberg, Comcast, Deutsche Bank, GitHub, J.P Morgan Chase, Starbucks, and Vodafone. From HashiCorp's side, the deal will enable the infrastructure cloud company to benefit from IBM’s resources and capacities. IBM’s interests lie in HashiCorp’s expertise in the increasing stake that cloud infrastructure brings.


The synergies are especially significant with Red Hat, which IBM acquired in 2019 for $34 billion. Especially, HashiCorp’s two major products -Terraform, an infrastructure as code (IaC) product, and Vault, its passwords, token and certificates management product - could work well with Red Hat’s Ansible and OpenShift software layers.

Long-term Upsides

IBM's $6.4 billion acquisition of HashiCorp enhances its hybrid and multi-cloud capabilities, integrating HashiCorp's robust automation tools like Terraform and Vault with IBM’s Red Hat, watsonx, and data security services. This merger aims to simplify infrastructure and security lifecycle management, addressing the complexities of AI-driven application growth.

HashiCorp’s integration into IBM will leverage IBM’s extensive global presence and customer base, accelerating HashiCorp’s market reach and innovation. Financially, the deal is expected to be accretive to IBM’s Adjusted EBITDA within the first year and increase free cash flow by the second year. HashiCorp, with over 4,400 clients, including major corporations like J.P. Morgan Chase and Deutsche Bank, will significantly contribute to IBM’s revenue.

This acquisition positions IBM to capture a larger share of the cloud services market, which IDC estimates to have a total addressable market of $1.1 trillion by 2027. HashiCorp’s products will support the management of diverse cloud workloads, essential for the deployment of generative AI applications. The synergy between IBM and HashiCorp will create a comprehensive end-to-end hybrid cloud platform, enhancing IBM’s ability to address the growing demands of AI and hybrid cloud environments, ensuring long-term value creation for stakeholders.

Risks and Uncertainties


The Acquisition of Hashicorp also introduces several risks for IBM that have to be managed efficiently to create the expected synergies from the deal. One of the biggest concerns is integrating HashiCorp’s technology and corporate culture into IBM’s existing infrastructure. HashiCorp's suite of products, including Terraform, Vault, and Consul, are widely used for multi-cloud infrastructure automation. Integrating these into IBM’s current offerings, such as Red Hats Ansible Automation platform, could present technical and operational difficulties. If the integration does not run smoothly, it could heavily interrupt current services and impact customer satisfaction. Furthermore, the deal is subject to several regulatory concerns, creating further critical uncertainty. Given the market influence and size of IBM and Hashicorp, antitrust authorities might investigate the deal to ensure it will not reduce competition too heavily in the cloud computing sector. ⁤⁤Delays or conditions imposed by regulators could affect the transaction timeline and financial outcomes, potentially impacting IBM's strategic goals and market position. Finally, with 6.4 billion dollars, the deal presents a significant financial investment. The anticipated returns from this, depend on the successful integration of services and performance into IBM. The expected benefits, such as increased operating efficiencies and accelerated growth, might take longer to materialize than projected, impacting IBM's financial stability and shareholder value in the short term.⁤


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