UK Competition Authority investigating IBM’s acquisition of HashiCorp

The U.K. government is examining whether IBM’s acquisition of cloud infrastructure company HashiCorp could lead to a “substantial lessening of competition” in the country’s markets.

IBM revealed its plan to acquire HashiCorp for $6.4 billion in April 2024 to better address the increasing demand for AI-related solutions. HashiCorp offers products for hybrid and multi-cloud lifecycle management, such as the Terraform infrastructure-as-code tool, which aids in the development and operation of AI applications.

Instead of integrating HashiCorp into its open-source subsidiary, Red Hat, the company will operate as part of IBM Software. IBM stated that the acquisition will help expand the reach of its products.

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The Competition and Markets Authority informed both companies of an upcoming Phase 1 investigation on August 1, 2024, and formally launched the probe on December 30. A preliminary decision on whether to initiate a full investigation must be made by February 25, and third parties have until January 16 to submit their comments.

IBM-HashiCorp deal facing criticism

IBM has faced challenges since announcing the acquisition, with the U.S. Federal Trade Commission reviewing it for potential anti-trust concerns.

Additionally, in June, a HashiCorp investor sued the company, claiming that the acquisition by IBM disproportionately benefited its board members over the shareholders. The executives allegedly stood to gain substantial personal benefits from the deal, such as certain “golden parachutes” and converting their large, illiquid stock holdings into cash.

Such incentives created conflicts of interest, according to the plaintiff, leading the board to favor the IBM acquisition over potentially more lucrative opportunities for shareholders and potentially diminishing the value of their investments. However, the suit was mysteriously withdrawn two days later.