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October 23, 2017
martinwolf  Transaction Analysis
Cisco to Acquire BroadSoft

Financial Information*
  • Enterprise Value                                       ~$1.9B
  • EV/LTM Revenue                                        5.4x 
  • EV/LTM EBITDA                                         78.2x                                          
Transaction Facts
  • Cisco today announced a definitive agreement to acquire BroadSoft (Nasdaq: BSFT) for $55 per share, or an aggregate purchase price of ~$1.9B in cash, assuming fully diluted shares and conversion of debt.  
  • The acquisition is expected to close during the first quarter of calendar year 2018. 
Continual Transformation through M&A
  • Significant MilestoneThe purchase is Cisco's second-largest out of the seven it has made this year, and also marks the company's 200th acquisition overall. As of late, Cisco has been fond of software companies, especially those with strong cloud application and business monitoring offerings. Complementing its blockbuster $3.7B AppDynamics acquisition in January, Cisco announced its plans to acquire startup Perspica, which provides stream-based processing and prediction capabilities for IT operations, just last week; the Perspica engineering team will be folded into AppDynamics and strengthen Cisco's total machine-learning capabilities. As predictive analytics, which uses large amounts of data in various cloud environments, sees an increase in demand, Cisco is ensuring it has all its bases covered as competition ramps up. 
  • Deeper CollaborationMaryland-based BroadSoft delivers unified communications via service providers, operating through more than 450 telecom carriers in 80 countries. With a strong presence in the SMB market, the company has over 19 million business subscribers in total, and its portfolio is also complementary to Cisco's existing Hosted Collaboration Solutions (HCS) platform. BroadSoft's own cloud-based product combines video, voice, messaging, screen sharing, file sharing, and conferencing -- such cloud-based subscription services align with Cisco's overall cloud investment strategy. 
  • Recurring RevenueWhile also seeking to increase its presence in the UC market, Cisco is adamantly looking to move cloud-managed solutions across its entire networking portfolio. The numbers indicate why the push has been so strong: Cisco's total revenue declined 4% in the most recent quarter from the same period a year prior, but the company's portion of product-deferred revenue related to recurring software and subscriptions increased by 50%. Recurring offers have become increasingly crucial to its total revenue, constituting 31% of the sum -- an increase of 4 percentage points from the same period a year prior. 
     
     
For more information about this potential transaction,  click here to read the press release.

*Financial Information from the press release and S&P Capital IQ. 

martinwolf was not the advisor in this transaction.

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About martinwolf    


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 150 transactions in over 20 countries and sold seven divisions of Fortune 500 companies. 

 

martinwolf is a member of FINRA and SIPC. For more information, visit www.martinwolf.com.  

 

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