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IBM could spend up to $30 billion on M&A deal: Analyst

Yahoo Finance Live anchors discuss the outlook for IBM’s M&A deal.

Video Transcript

- Let's also watch shares of IBM here as we get closer to the start of the trading session. We're keeping a close eye on IBM, as the shares are lower premarket by about half a percent this morning, after a new note from Evercore ISI laid out the plans for future mergers and acquisitions, noting that potential M&A could drive a larger than expected acceleration to IBM's top line growth and that the company is looking for assets that are more adjacent to their own product solutions portfolio.

This is kind of why I brought this up to Dan Ives earlier. It was because of this note from Evercore around IBM and this real acquire to growth strategy that we've seen across tech for so many years, but especially for IBM. What they had actually done was screened publicly listed companies to identify some of the potential companies that operate in the software industry with the forecasted growth above 30% and market cap between kind of this mid-cap or small cap $500 million up to $30 billion to really see exactly where they could have the opportunity to even nibble at a deal right now.

- Yeah, I did not realize this-- full disclosure-- that IBM has made, according to the notes, 25 acquisitions since 2020 for a total of a little less than under $4 billion. And this comes after, I think it was the 2019 closure of Red Hat, that Red Hat. That was a big business acquisition for IBM. It has been integrated very well and has been a key driver of their results.

But IBM's top line has not been good going on two or three years now. So it might be time for them, with all the cash they might have, to go out there and buy a business. Now, they have potential capacity, up to $30 billion, do a deal up to $30 billion given the strength of their balance sheet. A couple of names highlighted on here are Okta, Zscaler, even a DocuSign maybe potentially of interest to an IBM, according to this analyst at Evercore.

- Yeah, well, within tech, it's going to be amazingly key to kind of hold on to some of that cash too in this time period, as every company is trying to navigate and remain in a good liquidity position, given the impending decision making restructuring, perhaps, that we might continue to see across tech in this near term.