Cisco (Nasdaq: CSCO) has agreed to buy cybersecurity and observability company Splunk (Nasdaq: SPLK) for around $28 billion in cash. That works out to a ~30% premium and and a ~7.0x revenue multiple, an attractive outcome for Splunk relative to recent comps like New Relic (5.0x revenue).
The announcement isn’t a complete surprise following rumored interest back in February. Cisco also had cash to spend, needed a high-growth acquisition, and had separately hinted that something was coming.
It’s a solid deal for Cisco. Differing sales channels and minimal client overlap provide reasonable cross-sell certainty while furthering Cisco’s goal of recurring software growth (+$4 billion ARR on today’s $24 billion).
It also complements an existing Cisco/Splunk analytics partnership, as well as certain Cisco offerings that are actually built on Splunk (read: solid cost synergies).
Tidal Partners LLC is acting as financial advisor to Cisco, Simpson Thacher & Bartlett LLP is acting as legal counsel, and Cravath, Swaine & Moore LLP is acting as regulatory counsel. Qatalyst Partners and Morgan Stanley & Co. LLC are acting as financial advisors to Splunk and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counsel.