Here are 9 companies IBM could buy given that new CEO Arvind Krishna said that it will get back to its ‘acquisitive strategy’ in a few months, according to experts (IBM)

IBM CEO Arvind KrishnaIBM CEO Arvind Krishna

Incoming IBM CEO Arvind Krishna

IBM


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  • IBM had expected to slow down its M&A since buying Red Hat last year for $34 billion. 
  • But new CEO Arvind Krishna said on his first earnings call last month that the company plans to resume its “acquisitive strategy” in several months.
  • He’s focused on boosting IBM’s position in AI and hybrid cloud, he said. 
  • Here are 9 companies experts say IBM could seek to buy, including Snowflake, Automation Anywhere, and Datarobot. 
  • Click here for more BI Prime stories.

IBM is known as one of the most acquisitive companies in the world. But the tech giant was expected to go slow on the M&A front after buying Red Hat for $34 billion last year, the biggest acquisition in IBM’s history.

“We’ve focused all of our M&A effort on Red Hat in the last 18 months,” IBM senior executive Rob Thomas told Business Insider in February when the company unveiled a new AI imitative. “$34 billion consumes a lot of time and energy.”

Shortly after the interview, the coronavirus crisis pandemic led to global economic downturn. Suddenly, the tech landscape has changed. The economic slump has disrupted the sector, crushing valuations to the point that experts expect a rash of M&A activity.

In fact, when IBM reported first quarter results last week, new CEO Arvind Krishna indicated that Big Blue was prepared to begin buying again.

“You should expect that over time — over time meaning just that as it gets past the next few months — we will get back to an acquisitive strategy,” he told analysts on the company’s first quarter earnings call. “We’ve been clear that we will acquire when we find properties that are both attractive or that fit our strategy and hybrid cloud and AI are the focus of our business going forward.”

With that in mind, here are 9 companies that experts say IBM could try to buy:

Snowflake

Frank Slootman

Snowflake CEO Frank Slootman


Aspen Technology



What it does: Cloud data warehousing

Market Cap: $12.4 billion

What IBM would want to buy it: One of the challenges of the cloud is figuring out how to store massive amounts data on web-based platforms, instead of private data centers. Even cloud giants Amazon,  Microsoft and Google struggled with this problem, which created openings for startups. One of them — Snowflake — quickly emerged as the hottest startup in cloud data warehousing by using AI and machine learning.

Sean Foote, a venture capital investor who teaches at the UC Berkeley Haas School of Business, said IBM “could substantially build [its] AI portfolio through acquisitions like Snowflake.”

Workday

Workday CEO Aneel Bhusri

Workday CEO Aneel Bushri

Kevin Moloney/Fortune Brainstorm Tech


What it does: Human capital management software

Market Cap: $34 billion

What IBM would want to buy it: If IBM had the appetite for another big acquisition, the Pleasanton, California-based tech giant would be a logical target to help it boost its cloud portfolio, said Robert Siegel, a management lecturer at Stanford Graduate School of Business and venture capital investor. 

Workday is one of the pioneers of cloud software, also referred to as software-as-a-service, and acquiring it would makes IBM more competitive in the enterprise software space.

Siegel did note that buying Workday “would be a humongous acquisition.”

“The digestion would be a real problem,” Siegel told Business Insider, adding that Workday would potentially be against an acquisition, too. “You might end up being a very hostile takeover.”

Datarobot

DataRobot Jeremy Achin

Datarobot CEO Jeremy Achin

DataRobot


What it does: Enterprise AI software

Valuation: More than $1 billion 

Why IBM would want to buy it: Boston-based Datarobot helps businesses develop AI-powered tools and is one of the rising stars of the artificial intelligence market. Valoir analyst Rebecca Wettemann said Datarobot would be “an interesting play” for IBM that would give it access to “all the AI and automation it has built into its capabilities.”

Datarobot had been one of the fast-growing enterprise software startups, but it recently cut jobs due to the COVID-19 crisis, which may make it more vulnerable to an acquisition. 

TripActions

TripActions CEO Ariel Cohen

TripActions CEO Ariel Cohen

TripActions


What it does: Corporate travel services

Valuation: $4 billion

Why IBM would want to buy it: Valoir analyst Wettemann said TripActions would be the type of “user-ready capability” that would be a good addition to IBM’s portfolio.

The Palo Alto, California-based startup has also suffered during the COVID-19 crisis: it laid off 296 of its employees. Previously, it was working to expand its corporate travel reach by offering an easier way for customers to finance their business trips

Dell

Michael Dell

Dell CEO Michael Dell

Oracle PR/Flickr


What it does:  Enterprise systems

Market Cap: $29.6 billion

Why IBM would buy it:  This would be another huge buy for IBM. But given that tech giants are more likely to merge during a downturn to dramatically slash costs and become more competitive, it would be more plausible now than ever. For example, in 2002 Hewlett-Packard acquired Compaq Computer, merging two of the biggest PC makers in the world and creating a powerhouse that took on market leader Dell.

Investor Siegel says that if IBM bought Dell it could help both giants consolidate operations and “get cost synergies.”

Such a marriage would also help IBM and Dell become more competitive at a time when they’re struggling to adapt to the rise of the cloud.

Siegel said the key questions IBM and Dell would ask are: “Can you consolidate product lines and be more efficient?” Can you save money through scale? Can you gain share and reduce costs?”

Automation Anywhere

Mihir Shukla CEO of Automation Anywhere

Automation Anywhere CEO Mihir Shukla

Automation Anywhere


What it does: Robotic process automation software

Valuation: $7 billion

Why IBM would want to buy it: Robotic process automation , also referred to as RPA, is a hot tech market where IBM already competes.

Wettemann of Valoir said that Automation Anywhere could be an M&A target for IBM because of the company’s clear interest in the area. 

“Automation Anywhere is a really interesting company, and RPA will continue to be hot,” she told Business Insider. “Its focus on industry solutions and bot strength, as well as its low-code approach, brings a lot to the table.”

Chairman of IBM’s automation division, Gene Chao, laid out IBM’s interest in RPA in a 2018 blog post:

“As machines are quickly learning to complete the repetitive and time-consuming tasks that take up much of our workdays, workers are being freed up to think more creatively and ambitiously about their jobs,” Chao wrote.

Databricks

Ali Ghodsi CEO Co-founder of Databricks

Databricks CEO Ali Ghodsi

Databricks


What it does: AI analytics

Valuation: $6.2 billion

Why IBM would want to buy it: Databricks, which raised $400 million at a $6.2 billion valuation late last year, has emerged as one of the hottest AI analytics platforms. 

VC and Berkeley faculty member Foote said that Databricks would be a “nice fit” for IBM.

“The reason: 80% of the pain of extracting insights from data is prepping the data — normalizing, labeling, creating structure where there is less, removing bad data,” he told Business Insider. “So platforms have a lot of that front-end work, and IBM Business Services might be able to help with that. It’s a nice fit, and IBM can run it through their business sales channel in a nice way.”

Okta

Okta Todd McKinnon

Okta CEO Todd McKinnon

Okta. Used by permission.


What it does:  Cloud identity and security management

Market Cap: $18.3 billion

What IBM would want to buy it:  Okta, which went public in 2017, is considered a trailblazer in access and identity management cloud software. Recently, the company played a key role in analyzing the usage of popular programs like Zoom and cybersecurity apps like those offered by Cisco, Citrix and Palo Alto Networks. 

Thomas Hayes, chairman of private equity firm Great Hill Partners, said the company would be an attractive target for IBM to expand its cloud applications portfolio, because it is “critical for moving corporate applications to cloud-computing environments.”

Evolven

Evolven CEO Sasha Gilenson

Evolven CEO Sasha Gilenson

Evolven


What it does: IT operations analytics

Valuation: Unknown 

Why IBM would want to buy it: Evolven is a small, New Jersey-based private company that uses AI to help businesses monitor their networks. For example, it flags risky server configurations “that could cause outages,” said IDC President Crawford Del Prete.

The company is the type of a niche player “that would not significantly move the needle for IBM,” but could help boost Red Hat’s reach, he said.

“[IBM] has made it’s big bet with Red Hat,” he said, “So now it’s about building out the ecosystem with intellectual property-based companies that can both make that ecosystem more powerful, and help customers with hard problems.”

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