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Cisco’s Biggest Ever Acquisition: Cisco to Acquire Cybersecurity Firm Splunk for $28bn

US technology company Cisco announced on September 21st that it agreed to buy US cybersecurity company Splunk for about $28bn. Cisco offered $157 in cash for each share of Splunk, which is a 31% premium to Cisco’s share price before investors' speculation. This cash offer values Splunk at about $28bn. Tidal Partners LLC is the financial advisor to Cisco. Qatalyst Partners and Morgan Stanley are acting as financial advisors to Spunk.

Cisco Systems is an American multinational technology conglomerate that designs, manufactures, and sells networking hardware, software, telecommunications equipment, and other high-technology equipment. In 2021 and 2022 Cisco acquired several AI-driven companies which helps Cisco to stay ahead in the rapidly evolving telecom and networking industry. Splunk is an American software company that provides applications and services for monitoring, searching, reporting, alerts, and visualisation of data generated by websites, applications, sensors, devices, and IT infrastructure. Splunk provides log management, analytics, and security solutions to companies by collecting, analysing, and acting on data generated across their infrastructure and applications. This deal could help reduce Cisco’s reliance on its networking equipment business, which is facing headwinds of supply chain issues and a post-pandemic slowdown in demand.

The combination of Cisco and Splunk could potentially help organisations move from threat detection and response to prediction and prevention. Splunk and Cisco have complementary capabilities in observability, which refers to the ability to collect and analyse relevant operations data that provides visibility into overall system behaviour and performance, which could help provide visibility across hybrid and multi-cloud environments, enabling customers to deliver smoother application experiences. Cisco and Splunk’s unification will turn it into one of the largest software globally. This could also transform Cisco into a more recurring revenue model from SaaS offerings. The acquisition is expected to generate positive cash flow and expand the gross margin of the combined company,

Cisco’s stock price was trading at $55.50 on September 20th and the stock dropped to $53.34 on September 21st, which was the day of the announcement. Splunk’s stock price was trading at $120.99 on September 20th and increased about 20% to $144.95 on September 21st. The board of directors of Cisco and Splunk unanimously approved the agreement for Cisco to acquire Splunk. The deal is expected to close by the end of the third quarter of 2024, pending regulatory approvals from the relevant authorities. However, some analysts said the overlap in the security business could invite antitrust scrutiny, while Cisco commented that it is not expecting the deal to face major regulatory hurdles. If the deal is shelved, a termination fee of $1.48bn needs to be paid to Splunk.

In conclusion, the Cisco-Splunk acquisition is the biggest technology transaction of the year so far. By acquiring Splunk, Cisco could expand its security, AI, and data analytics capabilities. The combined company will deliver an integrated platform that further unlocks the values of company data.

Written by: Jessica Feng

Sources: Capital IQ, Cisco Press Release, Reuters

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