IBM To Acquire HashiCorp, Inc. For $35 Per Share In Cash, Representing An Enterprise Value Of $6.4B

Author: Benzinga Newsdesk | April 24, 2024 04:08pm

$6.4 billion acquisition adds suite of leading hybrid and multi-cloud lifecycle management products to help clients grappling with today's AI-driven application growth and complexity

HashiCorp's capabilities to drive significant synergies across multiple strategic growth areas for IBM, including Red Hat, watsonx, data security, IT automation and Consulting

As a part of IBM, HashiCorp is expected to accelerate innovation and enhance its go-to-market, growth and monetization initiatives

Transaction expected to be accretive to Adjusted EBITDA within the first full year, post close, and free cash flow in year two

ARMONK, N.Y. and SAN FRANCISCO, April 24, 2024 /PRNewswire/ -- IBM (NYSE:IBM) and HashiCorp Inc. (NASDAQ:HCP), a leading multi-cloud infrastructure automation company, today announced they have entered into a definitive agreement under which IBM will acquire HashiCorp for $35 per share in cash, representing an enterprise value of $6.4 billion. HashiCorp's suite of products provides enterprises with extensive Infrastructure Lifecycle Management and Security Lifecycle Management capabilities to enable organizations to automate their hybrid and multi-cloud environments. Today's announcement is a continuation of IBM's deep focus and investment in hybrid cloud and AI, the two most transformational technologies for clients today.

 

"Enterprise clients are wrestling with an unprecedented expansion in infrastructure and applications across public and private clouds, as well as on-prem environments. The global excitement surrounding generative AI has exacerbated these challenges and CIOs and developers are up against dramatic complexity in their tech strategies," said Arvind Krishna, IBM chairman and chief executive officer. "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."

The rise of cloud-native workloads and associated applications is driving a radical expansion in the number of cloud workloads enterprises are managing. In addition, generative AI deployment continues to grow alongside traditional workloads. As a result, developers are working with increasingly heterogeneous, dynamic, and complex infrastructure strategies. This represents a massive challenge for technology professionals.

HashiCorp's capabilities enable enterprises to use automation to deliver lifecycle management for infrastructure and security, providing a system of record for the critical workflows needed for hybrid and multi-cloud environments. HashiCorp's Terraform is the industry standard for infrastructure provisioning in these environments. HashiCorp's offerings help clients take a cloud-agnostic, and highly interoperable approach to multi-cloud management, and complement IBM's commitment to industry collaboration (including deep and expanding partnerships with hyperscale cloud service providers), developer communities, and open-source hybrid cloud and AI innovation.

"Our strategy at its core is about enabling companies to innovate in the cloud, while providing a consistent approach to managing cloud at scale. The need for effective management and automation is critical with the rise of multi-cloud and hybrid cloud, which is being accelerated by today's AI revolution," said Armon Dadgar, HashiCorp co-founder and chief technology officer. "I'm incredibly excited by today's news and to be joining IBM to accelerate HashiCorp's mission and expand access to our products to an even broader set of developers and enterprises."

"Today is an exciting day for our dedicated teams across the world as well as the developer communities we serve," said Dave McJannet, HashiCorp chief executive officer. "IBM's leadership in hybrid cloud along with its rich history of innovation, make it the ideal home for HashiCorp as we enter the next phase of our growth journey. I'm proud of the work we've done as a standalone company, I am excited to be able to help our customers further, and I look forward to the future of HashiCorp as part of IBM."

Transaction Rationale

• Strong Strategic Fit – The acquisition of HashiCorp by IBM creates a comprehensive end-to-end hybrid cloud platform built for AI-driven complexity. The combination of each company's portfolio and talent will deliver clients extensive application, infrastructure and security lifecycle management capabilities
• Accelerates growth in key focus areas – Upon close, HashiCorp is expected to drive significant synergies for IBM, including across multiple strategic growth areas like Red Hat, watsonx, data security, IT automation and Consulting. For example, the powerful combination of Red Hat's Ansible Automation Platform's configuration management and Terraform's automation will simplify provisioning and configuration of applications across hybrid cloud environments. The two companies also anticipate an acceleration of HashiCorp's growth initiatives by leveraging IBM's world-class go-to-market strategy, scale, and reach, operating in more than 175 countries across the globe
• Expands Total Addressable Market (TAM) – The acquisition will create the opportunity to deliver more comprehensive hybrid and multi-cloud offerings to enterprise clients. HashiCorp's offerings, combined with IBM and Red Hat, will give clients a platform to automate the deployment and orchestration of workloads across evolving infrastructure including hyperscale cloud service providers, private clouds and on-prem environments. This will enhance IBM's ability to address the total cloud opportunity, which according to IDC had a TAM of $1.1 trillion in 2023, with a compound annual growth rate in the high teens through 2027.1
• Attractive Financial Opportunity – The transaction will accelerate IBM's growth profile over time driven by go-to-market and product synergies. This growth combined with operating efficiencies, is expected to achieve substantial near-term margin expansion for the acquired business. It is anticipated that the transaction will be accretive to Adjusted EBITDA within the first full year, post close, and free cash flow in year two.

HashiCorp boasts a roster of more than 4,400 clients, including Bloomberg, Comcast, Deutsche Bank, GitHub, J.P Morgan Chase, Starbucks and Vodafone. HashiCorp's offerings have widescale adoption in the developer community and are used by 85% of the Fortune 500. Their community products across infrastructure and security were downloaded more than 500 million times in HashiCorp's FY2024 and include:

• Terraform – provides organizations with a single workflow to provision their cloud, private datacenter, and SaaS infrastructure and continuously manage infrastructure throughout its lifecycle
• Vault – provides organizations with identity-based security to automatically authenticate and authorize access to secrets and other sensitive data
• Additional products – Boundary for secure remote access; Consul for service-based networking; Nomad for workload orchestration; Packer for building and managing images as code; and Waypoint internal developer platform

Transaction Details

Under the terms of the agreement, IBM will acquire HashiCorp for $35 per share in cash, or $6.4 billion enterprise value, net of cash. HashiCorp will be acquired with available cash on hand.

The boards of directors of IBM and HashiCorp have both approved the transaction. The acquisition is subject to approval by HashiCorp shareholders, regulatory approvals and other customary closing conditions.

The Company's largest shareholders and investors, who collectively hold approximately 43% of the voting power of HashiCorp's outstanding common stock, entered into a voting agreement with IBM pursuant to which each has agreed to vote all of their common shares in favor of the transaction and against any alternative transactions.

The transaction is expected to close by the end of 2024.

Posted In: HCP IBM