Cisco halts AppDynamics’ IPO plan with acquisition offer
Last week, Cisco Systems (CSCO) made headlines when it announced the acquisition of AppDynamics. This acquisition garnered attention as AppDynamics was about to debut as a public company. Cisco offered $3.7 billion in equity and cash to AppDynamics and halted its vision of being a public company. Before AppDynamics could go ahead with its planned IPO, Cisco stepped in and agreed to pay double the price of what the IPO would have brought in.
Market participants thought that AppDynamics would be the first technology IPO of 2017. According to Rob Salvagno, Cisco’s vice president of corporate development, “The fact that they were in their IPO process represented a window where we needed to make a decision.” The below chart, which is based on Bloomberg data, shows that the number of tech IPOs on US stock exchanges has fallen, indicating a slowdown in tech IPOs.
Cisco’s offer to acquire AppDynamics
Cisco’s offer for AppDynamics comes out to approximately $26 per share, much higher than the expected $12–$14 per share range AppDynamics was expecting through its IPO. Cisco’s offer of $3.7 billion for AppDynamics is nearly double the $1.9 billion valuation it received in its last funding round in November 2015, when it raised $158 million, according to TechCrunch.
Cisco isn’t the only company that stepped in at the 11th hour to announce a billion-dollar acquisition. In mid-2016, Symantec (SYMC) agreed to purchase Blue Coat Systems for about $4.7 billion in a similar manner. Blue Coat Systems had filed Form S1, which explained its IPO (initial public offering) of securities less than two weeks before Symantec’s announcement.