Banks could reap as much as $115 million for orchestrating the IBM-Red Hat deal — the largest software acquisition in history

  • IBM’s $US34 billion acquisition of Red Hat is the largest software deal in history. The bankers who helped orchestrate the acquisition are set to make as much as $US115 million in fees.
  • Through the first three quarters of the year, banks pulled in about $US3 billion in revenue from tech M&A globally, far outpacing any other sector, according to data from Dealogic.
  • The IBM-Red Hat deal, which is the largest tech buyout since Dell paid $US67 billion for data-storage giant EMC back in 2015, could boost that tally even further if the deal closes.

IBM unleashed the largest software deal in history over the weekend, and if its $US34 billion buyout of Red Hat closes, the bankers who helped orchestrate the acquisition could reap as much as $US115 million in fees.

On Sunday IBM announced it was paying $US190 a share for Red Hat – best known for selling open-source Linux software for enterprise computing infrastructure, app development, and cloud management – a 60% premium from the company’s closing stock price on Friday, which has been battered amid the ongoing market turmoil.

Guggenheim and Morgan Stanley, Red Hat’s advisers, are set to split an estimated $US50 million to $US70 million in fees for working on the deal, according to Jeffrey Nassof, the director of the consulting firm Freeman & Co.

IBM’s advisers – JPMorgan Chase, Goldman Sachs, and Lazard – are expected to split an estimated $US35 million to $US45 million, Nassof said.

That doesn’t include fees for financing. Depending on how IBM pays for the deal, banks that underwrite the debt would be in line for another hefty payday.

In a year that has already been hot for tech mergers and acquisitions, this tie-up tops the chart.

Through the first three quarters of the year, banks pulled in about $US3 billion in revenue from tech M&A globally, far outpacing any other sector, according to data from Dealogic. Healthcare was a distant second at less than $US2 billion.

The IBM-Red Hat deal, which is the largest tech buyout since Dell paid $US67 billion for data-storage giant EMC back in 2015 and the largest software deal ever, could boost that tally even further if the deal closes.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.