And the Golden Tombstone goes to…

by Brenon Daly

For our final M&A Insight of 2018, we’re going to look back on the astonishing year of dealmaking in the tech industry. Or rather, we’re going to have the pros do it, and tell us what stood out for them.

In our just-closed 451 Research Tech Corporate Development Outlook survey, among other questions we asked dealmakers to look at the handiwork of their peers around the tech industry and select what they thought was the most significant transaction of the year. They had plenty to consider from 2018. 451 Research’s M&A KnowledgeBase lists a record 105 transactions valued at more than $1bn from this year, which is twice the number announced at the start of the decade.

Without further ado, this year’s Golden Tombstone goes to IBM’s record-breaking purchase of Red Hat. The deal represents the largest software transaction in history, nearly twice the size of the second-biggest purchase. In the voting by some of the tech industry’s most seasoned dealmakers, IBM’s big bet slightly edged out Microsoft’s reach for GitHub.

That’s the good news for Big Blue. Taking a bit of luster off the coveted trophy is the fact that corporate buyers also selected IBM’s record-breaking pickup of Red Hat as the high-profile deal announced this year that’s most likely to struggle to generate the hoped-for returns.

The dual-placing for the blockbuster transaction probably isn’t unexpected, given its unprecedented scale. But the bears on the deal are overrepresented. IBM’s acquisition of Red Hat got almost three times the number of votes as second-place Broadcom-CA.

Those who ‘shorted’ IBM’s massive deal noted the vast cultural divide between buttoned-up Big Blue and the more freewheeling open source company. Also, IBM has been in the midst of a protracted decline in its business. In fact, since IBM picked up its previous Golden Tombstone award for the June 2013 purchase of SoftLayer, shares of Big Blue have shed 40% of their value.

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