Cisco to buy AppDynamics for $3.7billion

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Legacy technology firm, Cisco Systems Inc (CSCO.O) said that it agreed to buy U.S. business software company AppDynamics Inc for about $3.7 billion.

This deal will make it one of its largest deals of recent years as it searches for growth beyond its core networking business.

Legacy technology players like Cisco have been trying to shift their strategy to stay ahead of technology developments, such as the rise of cloud computing, that could otherwise threaten their core businesses.

Cisco’s announcement comes a week after Hewlett Packard Enterprise Co (HPE.N) said it would buy cloud startup SimpliVity for $650 million in cash.

AppDynamics makes software that manages and analyzes applications and it has about 2,000 paying customers, including NASDAQ Inc, Nike Inc and its new owner, Cisco.

Cisco swooped in to buy AppDynamics the day before the San Franciso-based firm was planning to price its long-planned IPO. The company has been on its road show with investors.

“The fact that they were in their IPO process represented a window where we needed to make a decision,” Cisco’s Salvagno said.

The $3.7 billion offer from Cisco is nearly double the $1.9 billion valuation AppDynamics received in its last financing round in November 2015. Cisco’s offer comes out to roughly $26 per share, higher than the estimated $12 to $14 per share range it was planning.

“Cisco made an offer that people felt was compelling,” said Ravi Mhatre, a board member at AppDynamics from LightSpeed Venture Partners.

AppDynamics will become part of Cisco’s Internet of Things and Applications Unit, reporting to Rowan Trollope. Cisco’s last large acquisition, Jasper, is also part of that unit, Reuters report.

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