Last week, Cisco announced its largest acquisition to date, purchasing cybersecurity software firm Splunk for $157 per share, totaling approximately $28 billion in cash. Splunk‘s technology aids businesses in reducing the risk of cyberattacks and resolving technical issues more swiftly. Cisco has been expanding its cybersecurity offerings to cater to increasing customer needs and drive growth.
In 2003, Michael Baum, Rob Das, and Erik Swan founded Splunk in San Francisco. Baum served as the company’s CEO until retiring in 2009. When Splunk went public in 2012, it was valued at roughly $1.6 billion. In 2020, Baum told the BBC in 2020 that he was, at the time, the company’s largest individual shareholder.
Cisco‘s CEO, Chuck Robbins, highlighted the significance of integrating artificial intelligence (AI) from Splunk’s technology to enhance network protection. The acquisition is set to be finalized in the third quarter of 2024.
This move is a significant one for Cisco, which has traditionally shied away from major deals. However, with the rise of public cloud services impacting Cisco‘s traditional business, the company has been investing heavily in cybersecurity.
In the fiscal year ending July 29, Cisco‘s core business revenue increased by 22% to $29.1 billion, while its security unit saw a 4% rise to $3.9 billion. Despite these gains, Cisco‘s shares have lagged behind the Nasdaq, with a 12% rise this year compared to Nasdaq’s 27% jump.
Robbins anticipates that the synergies between Cisco and Splunk will become evident within a year to a year and a half. He mentioned that the acquisition would be funded through a mix of cash and debt, aiming to make the combined entity one of the world’s largest software companies. Some analysts, however, have expressed concerns regarding potential product overlaps, regulatory challenges, and the acquisition price.
Splunk, which has recently shifted its focus to cloud-based offerings, will see its CEO, Gary Steele, join Cisco‘s executive team post-acquisition. Steele, who took over Splunk just over a year ago, was previously the CEO of cybersecurity firm Proofpoint.
If the deal faces regulatory issues or is terminated by Cisco, a $1.48 billion termination fee will be paid to Splunk. Conversely, if Splunk decides to end the deal, they will owe Cisco a $1 billion breakup fee. The acquisition was advised by Tidal Partners, Simpson Thacher, and Cravath, Swaine & Moore for Cisco, and Qatalyst Partners, Morgan Stanley, and Skadden, Arps, Slate, Meagher & Flom for Splunk.
