Cisco to buy cybersecurity firm Splunk for $28 billion

Cisco to buy cybersecurity firm Splunk for $28 billion

Cisco Systems has agreed to acquire cybersecurity firm Splunk for approximately $28 billion in its largest-ever deal. The acquisition aims to strengthen Cisco’s software business and take advantage of the growing artificial intelligence market. This transaction is considered the biggest technology deal of the year and will help reduce Cisco’s reliance on its networking equipment business, which has faced challenges due to supply chain issues and a slowdown in demand following the pandemic.

Cisco CEO Chuck Robbins highlighted the importance of security and observability in the deal, stating that these areas are critical for customers and unlikely to face spending cuts. Over the years, Cisco has been working to decrease its dependence on hardware and focus more on software and services through strategic acquisitions.

Splunk is known for its expertise in data observability, which helps companies monitor their systems for cybersecurity risks and other threats. The company operates on a subscription-based pricing model. While the two companies have previously held merger talks that fell apart, this deal represents a significant step forward.

Cisco offered $157 in cash for each share of Splunk, representing a 31% premium to the company’s last closing price. However, there is some uncertainty about regulatory scrutiny, as reflected in Splunk’s shares trading below the offer price and Cisco’s shares declining.

Cisco already has a data-security partnership with Splunk, and the acquisition will further accelerate revenue growth and gross margin expansion for Cisco. Splunk’s impressive customer base includes prominent companies such as Coca-Cola, Intel, and Porsche.

Splunk has faced challenges in 2023 due to an industry-wide slowdown in demand caused by rising interest rates and inflation. However, the acquisition by Cisco is expected to address these challenges and drive growth.

Analysts have raised concerns about potential antitrust scrutiny due to the overlap in the security business. However, Cisco expressed confidence that the deal will not face major regulatory hurdles, citing the synergistic nature of the integration and minimal overlap in technology.

The deal has been unanimously approved by the boards of both companies and is expected to close by the end of the third quarter of 2024, subject to regulatory approvals. It will not require approval from Chinese regulators. Cisco executives anticipate that the deal will be cash positive and add $4 billion in annual recurring revenue.

In the event that the deal is canceled, Cisco will have to pay Splunk a termination fee of $1.48 billion. Tidal Partners, Simpson Thacher & Bartlett, and Cravath, Swaine & Moore LLP advised Cisco, while Qatalyst Partners, Morgan Stanley, and Skadden, Arps, Slate, Meagher & Flom LLP advised Splunk.

Overall, this acquisition positions Cisco as a leader in AI-enabled security and marks a significant milestone in the company’s history of acquisitions.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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