Acquisitions & Divestitures

3 Months Ended

Mar. 31, 2024

Business Combination and Asset Acquisition [Abstract]

Acquisitions & Divestitures:

Acquisitions

Purchase price consideration for all acquisitions was paid primarily in cash. All acquisitions, unless otherwise stated, were for 100 percent of the acquired business and are reported in the Consolidated Statement of Cash Flows, net of acquired cash and cash equivalents.

During the three months ended March 31, 2024, the company completed two acquisitions within the Software segment and one acquisition within the Consulting segment at an aggregate cost of $255 million. These acquisitions are expected to enhance the company’s portfolio of products and services capabilities and further advance IBM’s hybrid cloud and AI strategy. These acquisitions did not have a material impact in the company's Consolidated Financial Statements.

At March 31, 2024, the remaining cash to be remitted by the company related to certain first-quarter 2024 acquisitions was $157 million. Of the amount outstanding, $144 million was recorded as restricted cash in the Consolidated Balance Sheet, most of which was paid in April 2024. The amount outstanding is primarily a non-cash investing activity for purposes of the company's Consolidated Statement of Cash Flows as of March 31, 2024.

The following table reflects the purchase price related to the first-quarter acquisitions and the resulting purchase price allocation as of March 31, 2024.


(Dollars in millions)	Amortization Life (in years)	All Acquisitions
Current assets		$	17
Property, plant and equipment/noncurrent assets		2
Intangible assets:
Goodwill	N/A	195
Client relationships	2-7	31
Completed technology	7	37
Trademarks	3	0
Total assets acquired		$	284
Current liabilities		13
Noncurrent liabilities		15
Total liabilities assumed		$	29
Total purchase price		$	255

N/A – not applicable

The valuation of the assets acquired and liabilities assumed is subject to revision. If additional information becomes available, the company may further revise the purchase price allocation as soon as practical, but no later than one year from the acquisition date.

Transactions Announced — On December 18, 2023, the company entered into a definitive agreement with Software AG to acquire StreamSets and webMethods, Software AG's Super iPaaS (integration platform-as-a-service) enterprise technology platforms, for approximately €2.13 billion in cash. StreamSets will add data ingestion capabilities to watsonx, and webMethods will provide clients and partners additional integration and API management tools for their hybrid multi-cloud environments. The acquisition is expected to close in mid-year 2024 subject to customary closing conditions, including regulatory clearance, and upon closing, will be integrated into the Software segment. In connection with the planned acquisition, on December 18, 2023 the company entered into foreign exchange call option contracts for a premium of $49 million to purchase a total of €2.13 billion on June 18, 2024 at a strike price of 1.095. Refer to note 16, “Derivative Financial Instruments,” for additional information.

On April 24, 2024, the company announced its intent to acquire all of the outstanding shares of HashiCorp, Inc., (HashiCorp). The combination of IBM’s and HashiCorp’s combined portfolios will help clients manage growing application and infrastructure complexity and create a comprehensive end-to-end hybrid cloud platform designed for the AI

era. Under the terms of the definitive agreement, HashiCorp shareholders will receive $35 per share in cash, representing a total enterprise value of approximately $6.4 billion. The transaction is expected to close by the end of 2024, subject to approval by HashiCorp shareholders, regulatory approvals and other customary closing conditions. Upon closing, HashiCorp will be integrated into the Software segment.

Divestitures

The Weather Company Assets — In August 2023, IBM and Zephyr Buyer, L.P., a wholly-owned subsidiary of Francisco Partners (collectively, Francisco), entered into a definitive agreement under which Francisco would acquire The Weather Company assets from IBM for $1,100 million inclusive of $250 million of contingent consideration, of which $200 million is contingent on Francisco’s attainment of certain investment return metrics. The assets include The Weather Company's digital consumer-facing offerings, The Weather Channel mobile and cloud-based digital properties including Weather.com, Weather Underground and Storm Radar, as well as its enterprise offerings for broadcast, media, aviation, advertising technology and data solutions for other emerging industries.

The transaction closed on January 31, 2024. Upon closing, the company received cash proceeds of $750 million and provided seller financing to Francisco in the form of a $100 million loan with a term of 7 years. The cash proceeds from the sale were included in cash from investing activities within the Consolidated Statement of Cash Flows. The seller financing is a non-cash investing activity. The company recognized a pre-tax gain on sale of $241 million at closing in other (income) and expense in the Consolidated Income Statement. As discussed in note 4, “Segments,” in the first quarter of 2024, The Weather Company assets previously reported in the Software segment were moved and recast to the Other–divested businesses category.