Networking giant Cisco and cybersecurity observability company Splunk announced a deal where Cisco will acquire Splunk for USD 28 billion in the biggest technology M&A of the year. The deal, which is also Cisco's largest acquisition ever, is expected to close in Q3 of next year, subject to regulatory approval.

Cisco will pay USD 157 per share in cash under the terms of the deal representing an equity value of USD 28 billion—a substantial premium over Splunk’s last recorded market capitalization of~USD 20 billion prior to the announcement. Cisco expects the acquisition to spur revenue growth and gross margins.

In recent years, Cisco has transitioned away from being a pure-play networking vendor to focus on developing secure network and cybersecurity software. Splunk’s observability platform will complement Cisco’s existing security portfolio, allowing it to offer customers an enhanced, AI-powered observability platform across hybrid and multi-cloud environments, as the company reported.

Splunk originally developed data analytics products and has expanded into  cybersecurity, offering observability tools to help businesses understand security threats and system issues. The company also recently transitioned from on-premises solutions to a SaaS model. Splunk reported revenue of USD 911 million in Q2 2023 and reports a customer count of 15,000.

The news saw Cisco shares 4% down at close, while Splunk spiked 21% to USD 144, though still below the offer share price.

Analyst QuickTake: M&A ticket size in the cybersecurity space had declined significantly during 2023 after the mega-deals of Google-Mandiant and KKR-Barracuda the previous year. This acquisition is a little over 5x the size of Google’s Mandiant takeover and marks Cisco’s fourth security acquisition in 2023; the company previously snapped up threat detection platform Armorblox , identity management firm Oort , and cloud security companies Valtix and Lightspin .