International Business Machines Corp. (IBM) is set to pay $34 billion in cash and debt to acquire Red Hat, a major distributor of open-source software and technology.
Here’s how the acquisition stacks up against other big historic deals in the tech sector. (This is excluding communication equipments company JDS Uniphase's $41 billion acquisition of optical-component supplier SDL Inc. and the AOL-Time Warner merger valued at $350 billion)
1. $67 billion – Dell Buys EMC Data Storage
In 2016, Dell and EMC, an information technology company focused on cloud-based storage centers, made history, joining forces to creating a huge IT powerhouse with a combined revenue of $74 billion.
When the deal was first announced it attracted plenty of scrutiny. Many analysts questioned whether Dell had overstretched itself in its bid to become a key player in the fourth industrial revolution.
Bears pointed out that big computer mergers, including Compaq Corp.’s 1998 acquisition of Digital Equipment Corp., Hewlett-Packard Co.’s 2002 acquisition of Compaq and Wellfleet Communications LLC’s 1994 merger with Synoptics Communications Inc., failed to live up to expectations and fretted about Dell taking on more than $50 billion in debt to complete the deal.
Investors are still waiting to see how this acquisition pans out, although so far the two firms appear to have done a successful job of creating a single company.
2. $37 Billion - Avago Technologies Merges With Broadcom
In 2015, Avago Technologies proposed a $37 billion merger with one of the world’s largest chipmakers, Broadcom. The combined company, based in Singapore and named Broadcom Inc. (AVGO), became the third-largest U.S. semiconductor maker by revenue, behind Intel Corp. (INTC) and Qualcomm Inc. (QCOM).
The deal was one of several chased by Avago’s serial deal-making CEO Hock Tan. Earlier this year, Tan tabled a $103 billion hostile takeover offer for Qualcomm, which was eventually blocked by the U.S. government. Had it have gone ahead, it would have become the biggest tech deal in history.
Tan’s aggressive strategy appears to have worked. In 2013, Avago traded around $37 a share. It now trades at $213.15.
3. $34 Billion - IBM Buys Red Hat ( Deal Expected to Close in 2019)
The Red Hat deal forms part of IBM’s ambition to expand its cloud business and follows similar, albeit smaller, recent moves made by other big tech firms such as Microsoft Corp. (MSFT) and Salesforce.com Inc. (CRM) to bet on open-source companies.
The $34 billion price tag makes this IBM’s biggest acquisition to date. If it goes through it will become the third biggest deal in tech and the largest ever in software, eclipsing Microsoft's $26.2 billion purchase of LinkedIn and Facebook Inc.’s (FB) $22 billion acquisition of messaging app WhatsApp.
4. $31.4 Billion - SoftBank Takes Over Arm
If IBM’s acquisition goes through, it will overtake Japan SoftBank Group Corp.’s 2016 acquisition of UK chip designer Arm Holdings as the third biggest tech deal in history. SoftBank purchased Arm immediately after the U.K. voted to leave the EU with big plans to become a leader in the internet of things and connected devices.
So far, Arm has struggled to live up to expectations. In fact, earlier this year SoftBank offloaded 51% of the U.K. chip designer’s Chinese subsidiary to a China-led group of investors. The deal was reportedly worth just $775.2m.
5. $26.2 Billion - Microsoft Acquires LinkedIn
Microsoft's deal to buy LinkedIn closed in Dec. 2016. The social networking site remained an independent company, and Microsoft began integrating its products with the platform, which now has over 500 million registered users.
In 2017, LinkedIn co-founder Reid Hoffman joined the tech giant's board. The exceptionally well-connected Hoffman is viewed as a ambassador for Microsoft in Silicon Valley.“He was tapping me as the Silicon Valley expert, and I was tapping him as the leader of this massive technology company that had a huge amount of impact on how corporations and organizations worked,” Hoffman told Wired about his first meeting with Microsoft CEO Satya Nadella.