Cisco to acquire Splunk Acquisition in a $28 billion deal

Cisco acquires Splunk: Cisco, a multinational digital communication technology conglomerate which is known for strategic acquisitions, breaks its trend by announcing the acquisition of Splunk for a hefty $28 billion. This marks a departure from their typical avoidance of huge acquisitions. The move integrates Splunk's observability platform into Cisco's security business, enhancing customers' understanding of security threats and aiding in log data analysis to address system failures and troubleshoot a wide range of enterprise system issues.

In this deal, Cisco is offering a substantial premium of $157 per share, a major increase from Splunk's 52-week low of $65 per share. This surge in offer price suggests potential competition for the logging giant. Currently, Splunk's market cap stands just above $20 billion.

Deal to drive next-gen AI-enabled security

Both companies' CEOs are enthusiastic about the merger, highlighting the significant AI aspect. Chuck Robbins, Cisco CEO, in a statement, said, “Our combined capabilities will drive the next generation of AI-enabled security and observability. From threat detection and response to threat prediction and prevention, we will help make organisations of all sizes more secure and resilient.” 

Ray Wang, the founder of Constellation Research, sees a natural synergy in this union, particularly in threat detection and security using AI and observability. “Uniting with Cisco represents the next phase of Splunk’s growth journey, accelerating our mission to help organisations worldwide become more resilient while delivering immediate and compelling value to our shareholders,” Wang said. 

In a year relatively quiet on the M&A front, this deal stands out as the most substantial enterprise software deal so far, overshadowing Silver Lake Partners' acquisition of Qualtrics for $12.5 billion in March. 

Boards approve the acquisition 

While both companies' boards have given their nod to the deal, it awaits regulatory approval, which may face scrutiny given the heightened regulatory environment for such acquisitions globally. If all proceeds as planned, the deal is set to close in the third quarter of the next year.

The deal is expected to close by the end of the third quarter of 2024, subject to regulatory approvals. However, the deal will not require approval from Chinese regulators. The deal is expected to be cash-positive and will add $4 billion in annual recurring revenue, Cisco executives said on a conference call with analysts. If the deal is shelved, Cisco will have to pay Splunk a termination fee of $1.48 billion.

Tidal Partners, Simpson Thacher & Bartlett, and Cravath, Swaine & Moore LLP were advisers to Cisco. Qatalyst Partners, Morgan Stanley, Skadden, Arps, Slate, Meagher & Flom LLP advised Splunk.

(With Reuters inputs)