This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: GI Partners Sells SoftLayer to IBM

NEW YORK ( TheDeal) -- SoftLayer Technologies, the Texas-based cloud infrastructure provider majority owned by private equity firm GI Partners, will be acquired by New York tech company IBM (IBM - Get Report).

Specifics of the deal were not publicized, but one source familiar with the transaction estimated the price tag to be approximately $2 billion. The New York Times first reported the deal's cost.

The deal is set to close in the third quarter.

IBM, led by chairwoman and CEO Virginia Rometty, also announced Tuesday that it would launch a new cloud services platform that will incorporate SoftLayer's offerings with IBM's SmartCloud.

The latest series of moves for the Armonk, N.Y.-based tech titan is seen as an effort to directly compete with companies such as Amazon (AMZN - Get Report), which, with its Web services platform, has developed a multibillion-dollar business through services such as Web marketing, cloud infrastructure and data analysis. "Competitors are going to need M&A like this to keep pace with Amazon" Web services, one industry insider suggested.

GI Partners acquired SoftLayer along with the company's management in an August 2010 deal; the PE firm would later merge it with DH Capital was financial advisor to the company when it was first acquired by GI Partners.

The Daily Deal reported in January that GI Partners, as majority stakeholder, had begun testing the market for a sale of SoftLayer and that the anticipated deal value of the company ranged from $1.5 billion to $2 billion.

Past deals in the space include last year's Cogeco Cable deal for Peer 1 Network Enterprises, at 13 to 15 times EBITDA, and CenturyLink's (CTL) $3.2 billion deal for Savvis in 2011, at 9 to 11 times EBITDA.

A Moody's Investors Service report projected SoftLayer would generate $425 million in 2013 revenue.

IBM's deal comes as M&A in the tech industry has bolstered otherwise uninspiring deal volume and values for 2013. With leveraged buyouts of companies including BMC Software (BMC), Websense (WBSN), and Dell (DELL), public markets have more often seen underperforming technology companies being removed from exchanges, than strategics striking deals for private companies.

However, that could be changing, especially as technology and competition force more and more companies to compete on mobile platforms: Salesforce (CRM) agreed Tuesday to buy out marketing software company ExactTarget (ET) for $2.5 billion.

IBM generally doesn't use financial advisers, but took legal advice from Cravath, Swaine & Moore's Eric Schiele. SoftLayer turned to Chris Bartlett at Morgan Stanley (MS) for financial advice and a Kirkland & Ellis team including David Breach, Travis Nelson, John Lynn and associate Amber Meek for legal counsel.

Chris Nolter and David Marcus contributed to this report.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
WBSN $24.72 0.04%
DELL $0.00 0.00%
BMC $0.00 0.00%
AMZN $671.32 -1.83%
IBM $144.13 -0.78%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs