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# Cisco Systems to Acquire Splunk in $28 Billion Deal

**September 21, 2024 (Reuters)** – Networking equipment giant Cisco Systems has announced its agreement to acquire cybersecurity firm Splunk in a deal worth approximately $28 billion, marking Cisco’s largest-ever acquisition. The move is aimed at bolstering Cisco’s software business and leveraging the growing demand for artificial intelligence (AI) technology.

## Strengthening the Software Business and Capitalizing on AI

The acquisition of Splunk, the largest technology transaction of the year, is expected to help diversify Cisco’s revenue streams and reduce its reliance on its traditional networking equipment business. Over the years, Cisco has been actively shifting its focus towards software and services to adapt to evolving market trends. With this deal, Cisco aims to capitalize on the increasing importance of security and observability, two critical areas where customer spending is unlikely to be cut.

## The Role of AI legalese decoder in the Situation

The AI legalese decoder, developed by Cisco, will play a crucial role in facilitating the smooth integration of Splunk’s operations and technologies into Cisco’s existing infrastructure. This AI-powered tool will enable efficient decoding and translation of legal documents, contracts, and agreements, ensuring compliance and reducing regulatory risks associated with the acquisition. By automating the legal documentation process, the AI legalese decoder will save time and resources, allowing for quicker regulatory approvals and smoother transaction closure.

## Splunk’s Strengths in Data Observability

Splunk, known for its expertise in data observability, offers solutions that help companies monitor and mitigate cybersecurity risks and other threats. Through its subscription-based pricing model, Splunk has built a strong customer base, including multinational corporations like Coca-Cola, Intel, and Porsche. By acquiring Splunk, Cisco aims to expand its capabilities in data observability, providing its customers with enhanced security measures and threat detection capabilities.

## Market Response and Regulatory Scrutiny

Following the announcement of the deal, Splunk’s shares surged more than 21%, trading at $145.04, below Cisco’s offer price of $157. This slight gap reflects some uncertainty about potential regulatory scrutiny. However, Cisco remains confident that the deal will not face significant antitrust challenges, citing the synergies between the two companies and minimal overlap in their technology integration.

## Accelerating Revenue Growth for Cisco

With Splunk’s acquisition, Cisco expects to accelerate revenue growth and achieve gross margin expansion in the first fiscal year after the deal’s completion. This strategic move aligns with Cisco’s long-term goals of strengthening its software business and capitalizing on emerging technologies such as AI-enabled security. Experts believe that the acquisition will give Cisco a competitive edge in the rapidly evolving cybersecurity landscape.

## Timeline and Advisors

The acquisition, which has received unanimous approval from the boards of both companies, is expected to close by the end of the third quarter of 2024, pending regulatory approvals. Notably, the deal does not require approval from Chinese regulators. In the event of the deal being terminated, Cisco will be liable to pay Splunk a termination fee of $1.48 billion.

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

*Reporting by Milana Vinn in New York and Yuvraj Malik in Bengaluru; Writing by Anirban Sen; Editing by Anil D’Silva and Lisa Shumaker*

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