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IBM has confirmed it has entered into a definitive agreement with HashiCorp in which it will acquire the California-based software company for $35 per share, equating to a $6.4 billion deal.

In its announcement, IBM said the acquisition of HashiCorp is designed to bolster its position in the hybrid cloud and AI markets.

Rather than selling off its business to IBM and closing down, HashiCorp has confirmed that it will continue to build products and services, but operating as a division of IBM Software with the backing of a much bigger company.

Speaking about the deal, IBM CEO Arvind Krishna said: Enterprise clients are wrestling with an unprecedented expansion in infrastructure and applications across public and private clouds, as well as on-prem environments.

Krishna added: HashiCorp has a proven track record of enabling clients to manage the complexity of today's infrastructure and application sprawl. Combining IBM's portfolio and expertise with HashiCorp's capabilities and talent will create a comprehensive hybrid cloud platform designed for the AI era.

IBM likes what it sees in the deal, revealing an attractive financial opportunity and the potential to expand the total addressable market. The deal also aligns with the companys broader strategy.

In IBMs most recent earnings call, CFO Jim Kavanaugh revealed that around 70% of HashiCorps revenue currently comes from US companies, adding that only around one in five of the Forbes Global 2000 are HashiCorp customers, alluding to the potential for scaling the business under the IBM umbrella.

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In the week leading up to the announcement, HashiCorp shares rose by around 34.8%. IBM investors seemed less sure about the deal, with share prices seeing a less impressive 1.6% uptick.

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IBM acquires HashiCorp in multi-billion dollar deal to boost cloud reach - TechRadar