Cisco’s Acquisition of Splunk

Cisco is set to acquire cybersecurity software company Splunk in a cash deal worth approximately $28 billion, according to an announcement made by the company on Thursday.

Importance of the Acquisition

This acquisition marks one of Cisco’s largest and further expands their offerings in the cybersecurity space.

Market Reaction

Splunk shares experienced a 20% increase in premarket trading, while Cisco shares saw a 5% decline.

Statement from Cisco CEO

Cisco’s chair and CEO, Chuck Robbins, stated, “From threat detection and response to threat prediction and prevention, we will help make organizations of all sizes more secure and resilient.” The deal is expected to be finalized in the third quarter of 2024.

Financial Impact

Cisco anticipates the deal to have a positive impact on cash flow and gross margin within the first year after the acquisition is completed. It is also projected to contribute to Cisco’s non-GAAP earnings per share by the second year.

Funding the Deal

Cisco plans to finance the acquisition through a combination of cash and debt.

About Splunk and Cisco

Splunk is a cybersecurity company that assists enterprises in monitoring and analyzing their data to mitigate the risk of cyberattacks and address technical issues more efficiently. Cisco specializes in the production and sale of telecommunications and networking equipment, along with a complementary suite of software.

Termination and Breakup Fees

If Cisco withdraws from the deal or is compelled to do so due to regulatory intervention, it will be required to pay Splunk a termination fee of $1.48 billion. Conversely, if Splunk backs out of the agreement, it will owe Cisco a $1 billion breakup fee.

Cisco’s Recent Acquisitions

In 2023 alone, Cisco has acquired four companies: Armorblox, Oort, Valtix, and Lightspin, all of which are in the cybersecurity or cloud security sectors.

Advisory Teams

Cisco received guidance from Tidal Partners, Simpson Thacher, and Cravath, Swaine & Moore, while Splunk was advised by Qatalyst Partners, Morgan Stanley, and Skadden, Arps, Slate, Meagher & Flom.

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