Although analysts have stated that the acquisition “appears to be high”, most view the development in positive light since it could boost Cisco’s revenues.
With Cisco Systems Inc looking to expand beyond its core networking business, the computing giant announced that it has agreed to acquire AppDynamics Inc, a U.S. business software company for about $3.7 billion.
It’s been quite a while since legacy technology players like Cisco have been trying to stay ahead of the technology curve by strategic investment other than their core businesses, so as to widen their footprint in the computing arena to withstand pressures from such areas, including cloud computing.
Following a similar trend, Hewlett Packard Enterprise Co had also recently announced its acquisition of cloud startup SimpliVity for $650 million in cash.
As per analysts, U.S President Donald Trump’s plan to incentivize U.S. companies to repatriate their overseas cash holdings could spur a new wave of deals for large technological companies such as Cisco and Hewlett Packard.
In reference to this acquisition, Cisco’s vice president of corporate development, Rob Salvagno, said during an interview that the acquisition fits Cisco’s long-term direction and its transition toward software.
AppDynamics creates software that analyses and manages a host of applications. It has nearly 2,000 paying customers, including Nike, Cisco and NASDAQ.
Cisco snapped up the company just before AppDynamics was about to come out with its long-planned IPO.
“The fact that they were in their IPO process represented a window where we needed to make a decision,” said Cisco’s Salvagno.
The deal represent Cisco’s second largest acquisition. In 2013, it acquired Sourcefire, a security company for $2.7 billion.
Fenwick & West acted as AppDynamics’ legal advisor while acted as its adviser.
Morgan Stanley, Qatalyst and Goldman Sachs advised AppDynamics on the deal while Fenwick & West acted as Cisco’s legal counsel.
The deal, a mix of cash and equity, is expected to close by April 2017.