The United Kingdom’s Competition and Markets Authority (CMA) has launched an inquiry into IBM Corporation’s proposed acquisition of cloud software vendor HashiCorp Inc. for $6.4 billion.
This investigation, announced on Monday, aims to assess whether the merger could negatively impact market competition.
The CMA is currently soliciting feedback from stakeholders, with submissions accepted until January 16, 2025. Following this initial consultation, the regulator may initiate a Phase 1 probe. Such inquiries evaluate the potential competitive risks posed by a transaction. If significant concerns are identified, the matter could escalate to a Phase 2 investigation, which might result in blocking the deal or requiring amendments to its terms.
Focus of the Inquiry
Although the CMA has not disclosed specific areas of focus, antitrust regulators typically scrutinize markets where the merging companies have overlapping interests. IBM and HashiCorp both operate in sectors such as infrastructure as code (IaC) and application orchestration, which could come under review.
HashiCorp’s Terraform is a widely used IaC tool that allows developers to automate the creation of cloud environments. It competes with IBM’s Ansible, acquired through the 2018 purchase of Red Hat, which specializes in infrastructure configuration. While Terraform is primarily used for cloud infrastructure, Ansible often focuses on on-premises hardware, though some use cases for the tools overlap.
In application orchestration, IBM’s Red Hat OpenShift relies on Kubernetes, whereas HashiCorp offers Nomad as an alternative. Nomad is marketed as a simpler solution capable of orchestrating not only containers but also other types of workloads.
Beyond these areas, HashiCorp provides various other tools for infrastructure management and cybersecurity, such as encryption key storage systems. All HashiCorp products are open source, with additional paid cloud-based versions that offer enhanced features and support. In its last reported quarter, HashiCorp generated $173.4 million in revenue, marking a 19% year-over-year increase.
Regulatory Context
This review by the CMA comes in tandem with an ongoing probe by the U.S. Federal Trade Commission (FTC), first revealed in July. Both agencies are examining whether the acquisition could stifle competition in key technology markets.
IBM’s bid to acquire HashiCorp, announced in April 2024, represents a strategic move to bolster its presence in cloud and artificial intelligence technologies. The acquisition would give IBM access to HashiCorp’s customer base of approximately 4,400 organizations, furthering its push into these high-growth domains.
Implications of the Decision
The CMA has provisionally set February 25, 2025, as the deadline to decide whether to approve the transaction or escalate it for further investigation. If approved, the deal could reshape competitive dynamics in cloud software markets, particularly in IaC and application orchestration. However, regulatory intervention could impose conditions or prevent the merger altogether, reflecting the global focus on preserving competition in the rapidly evolving technology sector.
As this story unfolds, the outcome of the CMA’s and FTC’s reviews will likely serve as a critical indicator of how regulatory bodies approach consolidation in the tech industry.
