$5B, eh? Squeezing all the existing organizations' budgets so that it can all be funneled towards M&A.
https://www.wsj.com/articles/ibm-nears-5-billion-deal-for-software-provider-868942ce
By: Laura Cooper and Lauren Thomas
June 23, 2023 7:49 pm ET
IBM is close to a deal to acquire software company Apptio for about $5 billion, according to people familiar with the matter, in a move that would bring the technology giant greater automation capabilities.
Apptio, owned by private-equity firm Vista Equity Partners, provides tools to help companies keep track of the software and services they use and better manage costs. The business has counted financial giants Allstate and Bank of America among its clients, according to its website.
The parties are in advanced talks for a purchase that could be finalized over the weekend, the people said, assuming the negotiations don’t fall apart at the last minute. It isn’t clear whether the purchase price includes debt.
Apptio is a big player in helping companies manage what they spend on technology, an area IBM has been seeking to grow in.
IBM, a longtime fixture in the U.S. technology landscape, is in the midst of a makeover, transforming itself into a company focused on the hybrid-cloud and artificial-intelligence businesses.
In 2019 it bought software provider Red Hat for about $35 billion, in its biggest acquisition ever, a deal aimed at boosting its cloud-computing business.
In recent years, Armonk, N.Y.-based IBM has spun off or divested businesses including Kyndryl Holdings, a big player in IT infrastructure and data-center management.
In 2022, IBM closed the sale of the healthcare-data and analytics assets that were a part of its IBM Watson Health operation, underscoring the challenges of the use of AI in healthcare. When the company announced the deal, IBM said the divestiture was another step in its hybrid-cloud and artificial-intelligence strategy.
IBM is also exploring a sale of its weather operation, The Wall Street Journal reported in April. That business, which includes The Weather Company’s business-to-business, mobile and cloud-based businesses including Weather.com, could fetch more than $1 billion in a sale, people familiar with the matter said. It was expected to attract private-equity buyers.
IBM’s chief executive, Arvind Krishna, has sharpened the company’s focus on areas including hybrid-cloud and quantum computing, AI and blockchain. Krishna took over for Ginni Rometty, the longtime face of IBM, when she stepped down in 2020.
More recently, Krishna has grappled with a broader slowdown in demand for tech products and services as the Covid-era bo-m in demand abates. In January, IBM joined other big technology companies in shedding jobs when it said it would cut roughly 3,900 positions.
In April, IBM reported first-quarter revenue of $14.3 billion, up slightly from the prior year. It booked software revenue of $5.9 billion, up 2.6% year-over-year. Its other segments are consulting, infrastructure and financing, the smallest division by revenue.
Apptio and IBM aren’t strangers. They have collaborated in the past to help their customers make better business decisions using data.
A sale of Apptio would represent a rare private-equity exit at a time when deal making across the U.S. has plummeted about 40% compared with the same period in 2022, according to Dealogic. The slowdown has hampered buyout firms looking to cash in on investments and return money to their fund backers.
Vista, which has its headquarters in Austin, Texas, struck a deal to acquire Apptio in 2019 for about $2 billion. The firm has helped Apptio expand through acquisitions, including the purchase of multi-cloud financial-management company Cloudability.
Cvent, another Vista-backed software company, was sold earlier this month to private-equity giant Blackstone for $4.6 billion. Late last year, Vista exited its investment in Ping Identity through a $2.8 billion sale to fellow tech-focused private-equity firm Thoma Bravo.
The Apptio transaction would represent a bright spot in deal making at a time when regulators in Washington have taken a tougher stance on mergers and acquisitions, particularly in the technology sector, chilling activity that has already been dented by rising interest rates and economic uncertainty.