IBM banks on friendlier US regulatory climate for dealmaking

IBM is hopeful of completing the $6.4 billion purchase of Hashicorp relatively smoothly given what Big Blue perceives to be a "more rational" and "pro-competition" regulatory environment.

The comments were made on Wednesday night during an exec earnings call with analysts to discuss IBM's latest results for calendar Q4 and 2024 as a whole, before the Justice Department sued to block HPE's buy of Juniper Networks.

Responding to a question about possible M&A activity as the US enters a "period of relatively low regulatory overhang," IBM boss Arvind Krishna, said:

"We are looking forward to a regulatory environment that is a bit more rational and a bit more pro-competition. So I think what that implies for us is that we think reasonable deals have a very good chance of getting through in a reasonable amount of time and not being held up for years."

IBM's acquisition of Hashicorp was first announced in April, intended as a way for Red Hat's Ansible Automation Platform's configuration management and Terraform's automation to "simplify provisioning and configuration of applications across hybrid cloud environments."

The deal has since been held up on both sides of the pond, with the US FTC opening an antitrust review in July and the UK's CMA launching an inquiry into the proposed transaction last month.

In expectation of a friendlier business approach from regulators, Krishna said with that in mind, "we are going to lean in more, which is reasonable. If you look at our free cash flow and you look at what we are setting out for the year, that could leave as much as $7 billion or a bit more."

Don't worry investors, IBM has your back and there is still enough tucked away for a dividend. The corporation ended last year with $12.7 billion in free cash and says it has flexibility to borrow if needed but intends to live within its means. "And if we find targets that meet our criteria, we are going to lean in and get things done."

"I'm going to just finish that by saying Hashi has been waiting out there for almost a year. We certainly hope that with a friendlier environment, that gets done soon and that then begins to open up the aperture for getting more deals done. So I think hopefully that address both the cash flows and the regulations around M&A."

CFOP James Kavanaugh chimed in, saying "we fully expect to close the Hashi transaction in a relatively soon period of time… We fully expect that in this new administration environment."

One exec that will have been surprised by the latest decision by a regulator is HPE. CEO Antonio Neri told The Register late last year that he expected the $14 billion purchase of Juniper Networks to be completed late in 2024 or early in 2025.

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Just yesterday, however, the Justice Department – which was already examining the transaction's implications – said it would "eliminate fierce head-to-head competition between the companies, raise prices, reduce innovation, and diminish choice for scores of American businesses and institutions."

It has sued to block the marriage between HPE and Juniper, the second and third biggest providers of wireless local area networks in the US, filing a complaint in the Northern District of California.

Hashicorp doesn't command the same market share as Juniper Networks in its sector, and no such legal action has het been launched. With a multi-billion war chest at its disposal, IBM will be keeping a watchful eye on the case.