INTERNATIONAL Business Machines (IBM) is in advanced talks to acquire software company HashiCorp, according to sources with knowledge of the matter.

IBM and HashiCorp could reach an agreement as soon as Wednesday (Apr 24), said the sources, who asked not to be identified discussing confidential information.

HashiCorp shares, which jumped as much as 28 per cent on Tuesday, closed up 19 per cent to US$29.15 for the biggest one-day gain in more than two years, giving the San Francisco-based company a market value of US$5.8 billion. That reversed a 10 per cent decline over the past 12 months through Monday’s close.

Bloomberg News reported in March that HashiCorp had been considering a sale. A final agreement has not been reached and talks could still end without one, the sources said.

Representatives for IBM and HashiCorp declined to comment. The Wall Street Journal reported earlier Tuesday that IBM and HashiCorp were in talks.

HashiCorp’s software helps companies in a range of industries set up their digital infrastructure in the cloud, which can lower costs and speed up the time it takes them to bring products to market.

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A deal for HashiCorp would strengthen IBM’s hybrid cloud focus and “appears to be a good strategic fit”, wrote Bloomberg Intelligence senior analyst Anurag Rana. “HashiCorp helps organisations shift their workloads to a public cloud from on-premise, and will likely complement IBM’s open-source products sold by Red Hat.”

IBM’s multi-cloud approach makes it the most logical buyer of HashiCorp, Piper Sandler analyst James Fish wrote in March, adding that IBM historically used the software company’s products.

Shares in Armonk, New York-based IBM have risen 45 per cent over the past 12 months and were little changed on Tuesday, giving the company a market value of about US$167 billion. IBM is set to release first-quarter earnings for 2024 on Wednesday.

IBM’s largest acquisition to date remains its US$34 billion acquisition of Red Hat in 2019. That software business has become a point of investor anxiety in recent quarters, as its growth has slowed to single digits, comparatively sluggish for a unit that once regularly jumped more than 20 per cent each quarter.

In the past year, IBM has announced more than 10 acquisitions, including its US$4.6 billion takeover of software company Apptio and purchase of data-integration platforms StreamSets and WebMethods for 2.13 billion euros (S$3.1 billion). BLOOMBERG