After a national security review, IBM has been cleared to sell its low-end server unit to Lenovo for $2.3 billion. The security review was necessitated due to tensions between America and China where Lenovo is based. Although the Committee on Foreign Investment in the U.S. put some conditions on the deal, they do nothing to change its terms.
According to the review of the transaction, the deal was good for both the companies and their customers. For IBM, the goal of the deal was to get rid of a business that was not as profitable to concentrate more on cloud computing and data analytic tools. However, they will continue to maintain x86 servers used by the government. These are the servers that are being sold as part of the deal and are currently made in China. This agreement was considered a crucial factor in the deal being approved according to experts.
Approval for the deal between IBM and Lenovo may be a sign that a deal that Lenovo is trying to complete with Google may also be approved. If it goes through, that deal would see Lenovo purchase Google’s Motorola Mobility Unit for $2.91 billion. This is the second time that Lenovo and IBM have gotten approval for a deal. In 2005, Lenovo acquired IBM’s personal computer unit for $1.25 billion.
Sale of business deals that involve companies in different countries may be given a higher level of scrutiny by regulators. This is to ensure that national security will not be compromised if the deal is allowed to go through. Companies that are seeking clearance for an international deal may wish to hire a business law attorney. An attorney may be able to work with all parties involved to answer questions, secure documents and increase the odds of a timely approval process.
Source: Bloomberg, “IBM Obtains U.S. Approval for Sale of Server Business to Lenovo“, Alex Barinka and David McLaughlin, August 15, 2014
Source: Bloomberg, “IBM Obtains U.S. Approval for Sale of Server Business to Lenovo“, Alex Barinka and David McLaughlin, August 15, 2014
