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August 2, 2018
martinwolf  Transaction Analysis
Cisco To Acquire Duo Security for $2.35B

Financial Information*
  • Enterprise Value                                        ~$2.35B
  • EV/LTM Revenue                                        N/A
  • EV/LTM EBITDA                                          N/A
Transaction Facts
  • Cisco (Nasdaq: CSCO) announced today its intent to acquire privately held Duo Security for $2.35B. The deal will be paid out in cash with some assumed equity awards.
  • The acquisition is Cisco's largest since it bought AppDynamics for $3.7B in 2017.
  • The deal is expected to close by the end of Cisco's fiscal 2019.
Entering Into the Multi-Cloud Generation
  • Leading Technology: The acquisition will play an important role in extending Cisco's intent-based networking solutions into multi-cloud environments. Duo Security is currently a market leader in the authentication space, providing a cloud-based solution that verifies the identity of users and the health of their devices before granting access to applications. The unicorn, which previously raised $118M in venture funding, could strengthen its position in the identity and access management (IAM) space. In addition, the company will be well-poised to build global scale, winning over larger clients that want to work with an established, trusted name like Cisco's.
  • Advancing Vision: Broadening its software-focused and subscription-based portfolio through Duo's technologies will advance Cisco's bigger vision of integrating its software and cloud products into a single platform architecture. Automating the network as one large software system, as opposed to a collection of independent routers, switches and access points, is a key goal for Cisco.
  • Extending Reach: As the SD-WAN market grows at an accelerating pace, Duo's solution will strengthen Cisco's position in the market by adding to Cisco's networking portfolio. The solution can give Cisco the boost it needs to offer an access management solution integrated with products like its Viptela SD-WAN solution. Ultimately, the combination of Cisco's network security capabilities and Duo's expertise will place the company ahead of its peers.
  • Shifting in Time: Cisco has a successful security business, growing 11 percent in the fiscal third quarter, or almost three times the rate of the company's overall growth. Cisco's appetite for security and software is in line with the industry shift toward cloud computing and open-source software, to which the market has responded favorably: Cisco shares gained 9.3 percent this year, as of yesterday's close. Nevertheless, the company continues to rely on hardware for the bulk of its revenue -- security accounted for only 4.7 percent of total sales. 
  • Investing in Security: Cisco is not afraid of big spending in the security space. The company acquired cybersecurity vendor Sourcefire for $2.7B in 2013 in addition to spam and spyware protection provider IronPort Sytstems for $830M in 2007.
For more information about this transaction,  click here to read the press release.

*Financial information from the press release.

martinwolf was not the advisor in this transaction.

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Headquartered in Scottsdale, Arizona with offices in the San Francisco Bay Area and New York, martinwolf is a leading M&A Advisory focused on middle market companies in the IT Services, IT Supply Chain, IT-Enabled Business Process Outsourcing and Software as a Service (SaaS) space. Since 1997, our team has completed more than 155 transactions in over 20 countries and sold seven divisions of Fortune 500 companies. 

 

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