The IBM Deal For The Software Provider Is Nearing $5 Billion

(CTN News) – According to people familiar with the matter, IBM is close to buying software company Apptio for $5 billion, a move that would enhance IBM’s automation capabilities.

Apptio, a private-equity company, offers tools to help companies manage costs and keep track of the software and services they use. As of its website, the company counts Allstate and Bank of America among its clients.

According to the people, negotiations for a purchase could be finalized over the weekend if the negotiations don’t collapse. Debt may be included in the purchase price.

With Apptio, companies can manage what they spend on technology, an area in which IBM is looking for growth.

Longtime American technology giant IBM is transforming itself into a hybrid cloud and artificial intelligence company in the midst of a makeover.

To boost its cloud-computing business, it bought Red Hat in 2019 for about $35 billion, its biggest acquisition ever.

Among IBM’s recent spinoffs or divestitures is Kyndryl Holdings, a company with a large presence in data centers and IT infrastructure.

IBM sold its Watson Health operation’s healthcare-data and analytics assets in 2022, underscoring the challenges of AI in healthcare. According to IBM, the divestiture was part of its hybrid-cloud and artificial-intelligence strategy.

IBM is also considering selling its weather division, according to the Wall Street Journal. Weather.com and its business-to-business, mobile, and cloud-based businesses could fetch more than $1 billion in a sale, according to people familiar with the matter. Buyers from private equity were expected to be attracted.

Arvind Krishna, IBM’s CEO, has sharpened the company’s focus on hybrid cloud, quantum computing, artificial intelligence, and blockchain. After Ginni Rometty stepped down in 2020,

Krishna became IBM’s new face.

A slowdown in tech demand has recently plagued Krishna since the boom of the Covid era waned. Announcing a 3,900-job reduction in January, IBM joined other big technology companies in slashing jobs.

A slight increase in first-quarter revenue of $14.3 billion was reported in April. Over the past year, it generated $5.9 billion in software revenue, an increase of 2.6%. In terms of revenue, consulting, infrastructure, and financing are its smallest segments.

IBM and Apptio aren’t strangers. Together, they have helped their customers use data to make better decisions in the past.

According to Dealogic, the sale of Apptio would be a rare private equity exit at a time when deal making has plummeted by about 40%. Investors looking to return money to their fund sponsors have been hindered by the slowdown.

In 2019, Vista, based in Austin, Texas, acquired Apptio for about $2 billion. In addition to Cloudability, the firm has helped Apptio expand through acquisitions.

The $4.6 billion sale of Cvent, another Vista-backed software company, took place earlier this month. Thoma Bravo acquired Ping Identity last year for $2.8 billion from Vista’s investment in the company.

At a time when Washington regulators are toughening up on mergers and acquisitions, particularly in the technology sector, Apptio would represent a bright spot in deal making. As a result of rising interest rates and economic uncertainty, activity has already been slowed.

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