Splunk: We See Great Value for Shareholders In the $28 Billion Acquisition by Cisco

On Thursday, Cisco Systems CSCO announced its plans to acquire Splunk SPLK for $28 billion ($157 in cash per share), a 31% premium to Splunk’s Sept. 20 closing price. Cisco aims to expand its cybersecurity portfolio by integrating Splunk’s security information and event management solution into its broader security solution set. We are raising our fair value estimate for Splunk to $144 per share.

We view the $157 acquisition price as more than fair for Splunk shareholders, representing a 26% upside to our prior stand-alone fair value estimate of $125 for the firm’s stock. This deal appears to be the culmination of ongoing discussions, as reports in February 2022 suggested Cisco made a $20 billion bid for the company. We foresee little regulatory scrutiny, given the fragmented nature of the security and observability markets. Cisco and Splunk expect the deal to close within a year.

From a strategic perspective, we believe Splunk’s domestic-leaning business could benefit from Cisco’s global presence. Further, as an additional tool in Cisco’s broad security toolkit, we see potential cross-selling opportunities further driving the expansion of Splunk’s security offerings. We believe Splunk’s solutions are some of the best for ingesting, monitoring, and analyzing machine data.

We think Cisco has access to rich data floating through its infrastructure, so a joint security solution that can derive security-related insights and protection from this data would be a key addition. In particular, we think the company could combine Splunk’s strong SIEM solution with its own extended detection and response solution. From a go-to-market perspective, Cisco’s global presence and channel partnerships could potentially let it sell Splunk’s security solutions on a larger scale.