Red Hat / IBM

Red Hat / IBM: Vertical Limit: The Cloud, Linux and European Antitrust Scrutiny

Publication Date: February 25, 2019

Research Report Overview

From an antitrust perspective, the Red Hat / IBM transaction has presented a degree of complexity due to the parties’ long-standing vertical relationships. Red Hat and IBM are partners rather than competitors and work together on the open source Linux software platform. Regulators could probe whether IBM has an incentive to shift or reshape these vertical relationships in a manner which could be considered anti-competitive, for example, by halting the supply to competitors or degrading interoperability with competitors’ products. This potential for vertical effects is more likely to raise eyebrows with the European Competition Commission (EC) than the US Department of Justice (DoJ). In this report, we examine the segments of the cloud market where Red Hat and IBM operate, and where competition issues potentially arise. We then analyse how European and other antitrust regulators could deal with these based on precedent reviews.

Contents (34 Pages):

1. Cloud Computing: Industry Background and IBM’s Interest in Red Hat 2. Market Shares and Potential Antitrust Risks 3. European and US Antitrust Clearance Processes and Precedents 4. Break Price Analysis 5. Risk Arbitrage Trading Thoughts and Timing Appendix A. Deal Structure

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Deal Timeline

Red Hat / IBM

End Date: July 9, 2019

July 2019

June 2019

May 2019

April 2019

March 2019

February 2019

January 2019

December 2018

November 2018

October 2018

Deal Announced: October 28, 2018
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