Cisco’s $28 Billion Cash Deal to Acquire Cybersecurity Firm Splunk

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In a significant move, Cisco is set to acquire cybersecurity software company Splunk in a cash deal worth approximately $28 billion. This strategic acquisition marks one of Cisco’s largest to date and bolsters the company’s cybersecurity portfolio. This article delves into the details of this major business transaction, its implications, and the industry’s response.

The Acquisition:

Cisco’s acquisition of Splunk comes at a purchase price of $157 per share, representing a substantial investment. The deal is poised to enhance Cisco’s capabilities in threat detection, response, prediction, and prevention, ultimately strengthening the security posture of organizations across the spectrum. Cisco’s Chair and CEO, Chuck Robbins, expressed the company’s commitment to making organizations more secure and resilient.

Financial Outlook:

Cisco anticipates that this acquisition will yield positive cash flow and gross margin benefits within the first year following the transaction’s closure. Furthermore, it is expected to contribute positively to Cisco’s non-GAAP earnings per share by the second year. The financing of the deal will be a combination of cash and debt, positioning Cisco as a major player in the global software landscape.

Analysts’ Views:

While this acquisition has generated excitement in the market, analysts have offered mixed responses. Some have raised concerns about potential product overlap and regulatory scrutiny. Additionally, questions have arisen regarding the price tag for a company that recently shifted its focus to the cloud, which some analysts viewed as “underwhelming.”

Company Strategies:

Splunk’s transition from an on-premise, “customer-managed” approach to a cloud-oriented offering has sparked discussions. However, both Robbins and Splunk CEO Gary Steele defended the move, highlighting the continued importance of a customer-managed environment for many of their clients. Furthermore, the companies do not anticipate requiring regulatory approval for Splunk’s China operations.

About Splunk and Cisco:

Splunk is a cybersecurity company renowned for helping enterprises monitor and analyze their data to mitigate hacking risks and expedite technical issue resolution. On the other hand, Cisco specializes in the production and sale of telecommunications and networking equipment, complemented by a suite of software solutions.

Deal Contingencies:

In the event that the deal falls through due to regulatory intervention or Cisco’s withdrawal, Cisco is bound to pay Splunk a termination fee of $1.48 billion, as stipulated in a regulatory filing. Conversely, if Splunk decides to back out of the deal for any reason, it will incur a $1 billion breakup fee payable to Cisco.

Cisco’s Recent Acquisitions:

This acquisition of Splunk marks Cisco’s fourth acquisition in 2023. Earlier in the year, Cisco acquired Armorblox, a threat detection platform, as well as Oort, a company specializing in identity management. Additionally, Valtix and Lightspin, both cloud security firms, became part of Cisco’s expanding portfolio.

Legal Counsel:

Tidal Partners, Simpson Thacher, and Cravath, Swaine & Moore served as legal advisors to Cisco in this transaction. On the other side, Qatalyst Partners, Morgan Stanley, and Skadden, Arps, Slate, Meagher & Flom offered their expertise to Splunk.