UK regulator to investigate IBM takeover of HashiCorp

The UK’s Competition and Markets Authority (CMA) has launched a preliminary investigation into IBM's acquisition of HashiCorp.

The regulator said it's concerned that the $6.4 billion deal would lead to a substantial lessening of competition. It has put out a call for comment, set to close on 16 January, and revealed it will decide whether to refer the merger for a phase 2 investigation by 25 February.

The merger proposal was first agreed last April and was approved by HashiCorp stockholders in July. The plan is for HashiCorp to operate as a division inside IBM Software.

"By uniting two leading technology businesses with complementary visions, this transaction provides an incredible opportunity to accelerate HashiCorp's mission," said CEO Dave McJanne at the time.

San Francisco-based HashiCorp was founded in 2012 by Mitchell Hashimoto and Armon Dadgar.

The firm provides tools to help manage cloud infrastructure and security, offering infrastructure lifecycle management and security lifecycle management capabilities to help enterprises automate hybrid and multi-cloud environments.

HashiCorp serves more than 4,400 clients, including Bloomberg, Comcast, Deutsche Bank, GitHub, JP Morgan Chase, Starbucks, and Vodafone, along with 85% of Fortune 500 companies.

The announcement marks the latest in a slew of preliminary investigations launched by the CMA in recent years. The regulator has focused heavily on the UK’s cloud services markets, and raised concerns about a number of high-profile acquisitions and deals across 2024.

In particular, the CMA has launched an investigation into the state of competition in the UK cloud computing sector. The probe was launched in the wake of a report from Ofcom which raised concerns over customer flexibility and choice.

"Our market study has identified features that make it more difficult for UK businesses to switch and use multiple cloud suppliers. We are particularly concerned about the position of the market leaders Amazon and Microsoft," Ofcom said in a statement.

The CMA said it would look for technical barriers that could hinder customers’ ability to set up a multi-cloud architecture and switch cloud providers, along with the egress fees and discounts being offered by providers, as well as software licensing practices.

In September, it announced that it was planning to extend the inquiry by four months, reportedly to continue its investigation into Microsoft.