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June 4, 2018
martinwolf  Transaction Analysis
Microsoft Acquires GitHub for $7.5B in Stock

Financial Information*
  • Transaction Value                                        ~$7.5B
  • EV/LTM Revenue                                         N/A
  • EV/LTM EBITDA                                           N/A
Transaction Facts
  • Microsoft (Nasdaq: MSFT) announced today its acquisition of coding platform company GitHub in an all-stock transaction valued at $7.5B.
  • The deal is expected to close by the end of 2018.
  • Microsoft will appoint a new CEO for GitHub; former Xamarin CEO and current Microsoft corporate VP Nat Friedman will lead GitHub. GitHub will continue to operate independently and will remain an open platform.
Gaining Access to the Developer Community
  • Big Acquisitions: This deal marks Microsoft largest purchase after its $26B acquisition of LinkedIn in 2016. By acquiring GitHub, Microsoft will continue its  ongoing initiatives of public cloud and open source software. Currently, GitHub has  more tha n 28 million developers using its platform and over 85 million code repositories, making it the world's largest code host.
  • Cloud Expansion: Microsoft has been strategically cementing its position as an innovative company. Microsoft, pivoting away from its flagship Windows operating system, has been honing in on its cloud services segment, and this acquisition may help broaden its reach. Azure rose 93 percent in revenue in the third quarter ended March 31. Many believe Microsoft may look to integrate Azure with GitHub, ultimately allowing developers to run their GitHub projects on the cloud, while also simultaneously finding a way to make a profit out of the code company. One such strategy is to use GitHub to see which projects are popular to launch rivals of its own. 
  • Problem Solved: Despite GitHub's high valuation (it was valued at $2B in 2015), the company has been facing a few major problems. Not only has the company been looking for a new CEO for nine months, but it has also reported a loss of $66M in 2016 stemming from strong competitors in the software space. 
  • High Valuation: On May 29, Microsoft surpassed Google's parent company Alphabet in market value, becoming the third most valuable company in the world. To put that number into perspective, Microsoft's stock price is more than double than what it was when Satya Nadella became CEO four years ago. Nadella's focus on competing with Amazon in the cloud storage business, as well as maintaining diverse sources of revenue, has paid off.
For more information about this transaction,  click here to read the report.

*Financial information from the report.

martinwolf was not the advisor in this transaction.

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Headquartered in Scottsdale, Arizona with offices in the San Francisco Bay Area and New York, martinwolf is a leading M&A Advisory focused on middle market companies in the IT Services, IT Supply Chain, IT-Enabled Business Process Outsourcing and Software as a Service (SaaS) space. Since 1997, our team has completed more than 155 transactions in over 20 countries and sold seven divisions of Fortune 500 companies. 

 

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