IBM is buying software company Apptio in a $4.6 billion all-cash deal. The company says the acquisition will advance IBM’s automation capabilities.
Apptio, which is owned by private-equity firm Vista Equity Partners, works with enterprises such as Amazon Web Services, Microsoft Azure, and others to help companies plan their IT spend.
IBM (ticker: IBM) Chief Executive Arvind Krishna says coupling this service with the cloud-computing company’s existing AI platforms will give “clients the most comprehensive approach to optimize and manage all of their technology investments.”
The transaction is subject to approvals and is expected to close in the latter half of 2023.
IBM’s shares were up 0.4% to $129.96 after markets opened on Monday. That snaps a five-day losing streak for the stock.
The Wall Street Journal reported that the deal was nearing the finish line over the weekend.
Evercore analyst Amit Daryanani estimated that Apptio’s revenue for the next twelve months is in the range of $500 million to $800 million, considering a growth rate of 15% to 25% compounded annually. That means Apptio could contribute roughly one point to IBM’s year-over-year revenue growth.
IBM posted $60.53 billion in revenue last year.
The deal isn’t a big surprise “given that M&A is a component of IBM’s long-term model,” Daryanani wrote. He has a Neutral rating on IBM’s shares and a $140 target for price.
Write to Karishma Vanjani at [email protected].
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