It’s official: Microsoft will spend a whopping $7.5 billion to buy GitHub, a startup at the center of the software world

Microsoft CEO Satya Nadella, center, with GitHub's founders, Chris Wanstrath and Tom Preston-Werner.

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Microsoft CEO Satya Nadella, center, with GitHub’s founders, Chris Wanstrath and Tom Preston-Werner.
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Microsoft

  • Microsoft is acquiring GitHub for $7.5 billion in stock.
  • The acquisition brings together one of the world’s largest software companies, Microsoft, with one of the world’s largest software-development platforms, GitHub.
  • The deal is expected to close by the end of the year.

Microsoft is buying GitHub, a massive software-development platform with 24 million users, for $7.5 billion.

The deal is expected to pass regulatory review and close by the end of 2018. GitHub’s most recent private valuation, as of 2015, put the software company at about $2 billion, after raising $350 million in venture capital since its founding in 2008.

The $7.5 billion being offered to GitHub is to be paid in Microsoft stock. As Business Insider reported last week, the two companies have talked about a potential acquisition for some time – at one point, a $5 billion price tag was floated.

As the result of the acquisition, Microsoft’s vice president Nat Friedman is taking over as CEO of GitHub, taking over for current CEO Chris Wanstrath. Wanstrath said 10 months ago that he would step down, but had remained in the role while a search for his replacement was ongoing.

GitHub is an online code repository: Programmers all over the world use GitHub to host the code that powers their software projects. Once the code is on GitHub, anyone anywhere can download it, make their own tweaks and changes, and merge their changes back into the original project.

Because of this functionality, GitHub has found itself at the center of the world of open-source software development – making this deal somewhat ironic, as Microsoft spent much of the ’90s fiercely competing with open-source initiatives. Nowadays, though, Microsoft has warmed up to open-source, and Microsoft is the single biggest contributor to open-source initiatives on GitHub, making this acquisition a more natural fit than one might think.

GitHub founder and CEO Chris Wanstrath

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GitHub

As Business Insider reported last week, the protracted search for a replacement CEO led to trouble at GitHub.

The company was once looking to pursue an initial public offering, but employees said it became rudderless with Wanstrath on his way out.

The sale to Microsoft puts GitHub back on a more solid foundation. Friedman, the incoming CEO, has a history with software development as the founder of Xamarin, a software-development startup that Microsoft purchased in 2016. And several teams at Microsoft already use GitHub’s software tools.

From Microsoft’s perspective, this deal plays nicely into the company’s push into cloud computing, which is one of its biggest and most important initiatives. Bringing GitHub into the fold gives Microsoft a way to push its Azure cloud-computing platform to millions of highly engaged software developers.