Cisco's Acquisition of Splunk Expected to Receive Approval from the EU

It has been reported that Cisco's $28 billion acquisition of cybersecurity firm Splunk is set to receive unconditional approval from the European Union's antitrust authorities. According to insiders, the EU Commission is expected to approve the $28 billion deal after completing its preliminary review on March 13. Also, recent reports indicated that no "progress update" meetings were requested by both companies, suggesting that the transaction process is likely to accelerate.

Splunk, founded in 2003 and headquartered in San Francisco, focuses on software for searching, monitoring, and analyzing machine-generated data. The company addresses issues in digital infrastructure, specializing in data analytics, Security Information and Event Management (SIEM), and IT operations, aiding enterprises in monitoring and analyzing data to minimize the risk of cyberattacks and efficiently resolve technical issues. Currently holding over 1100 patents, Splunk's technology is relied upon by numerous large organizations worldwide for ensuring the security and reliability of their data systems.

In September, 2023, Cisco announced an agreement with Splunk for a $28 billion cash acquisition at $157 per share, combining cash and debt. This transaction stands as Cisco's largest acquisition since its inception and the largest software market enterprise merger in 2023. Despite being a newer player compared to Cisco in terms of establishment and recognition, Splunk has been active in the fields of network security and data analytics, earning recognition as a pioneer in the current realm of big data. Although some doubts were raised concerning Cisco's expensive acquisition of Splunk, for Cisco it might be a boost to its capabilities in AI-driven data analysis and an attempt to address the gaps in its current business layout, which is apparently more dependent on hardware services. Cisco anticipates positive cash flow and gross margin growth in the first fiscal year post-completion, with earnings per share growth expected in the second year.

Typically, such massive acquisitions will face scrutiny from global regulatory bodies, the reason why the two companies initially expected to finish the transaction procedures in the third quarter of 2024. However, earlier media reports disclosed that, during a financial report conference call, Cisco indicated an earlier completion by the end of the first quarter or early second quarter of 2024. Coupled with the expected approval from the European Union, it appears that Cisco's largest-ever acquisition is set to speed up.