NERA’s Role in IBM’s Acquisition of Red Hat, Inc.

The Situation

In October 2018, International Business Machines Corp. (IBM) and Red Hat, Inc.—a provider of enterprise Linux and other open source solutions such as Kubernetes—announced that they had reached an agreement whereby IBM would acquire Red Hat in a deal valued at approximately $34 billion.

NERA's Role

Red Hat retained NERA to assist its outside counsel, Skadden, in 1) evaluating the potential competitive effects of the transaction, as well as other contemplated transactions, and 2) following negotiation with IBM, engagement with the DOJ, European Commission, and other international competition authorities. A NERA team led by Senior Consultant Dr. Jason Hong undertook economic analyses examining competition across the IT software sector, which included dynamic considerations such as innovation in open source software and its implications on competition. NERA worked with counsel in engagement with the DOJ and European Commission economists and attorneys to assist the respective investigations and address questions about the potential horizontal and vertical competitive effects of the proposed transaction.

The Result

In May 2019, the DOJ concluded its review of the transaction and granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. In June 2019, the European Commission approved the transaction unconditionally, concluding that “the transaction would raise no competition concerns in any of the affected markets.” The parties closed the transaction on 9 July 2019.