Brussels, February 11, 2024 – Cisco Systems’ proposed $28 billion acquisition of cybersecurity firm Splunk could face a significant challenge from European Union regulators ahead of the March 13th antitrust review deadline, according to a recent filing by the European Commission.
The deal, announced in September 2023, aimed to accelerate Cisco’s business transformation and diversify its revenue streams by entering the security software market. However, EU antitrust regulators are reportedly concerned that the combined entity could hold too much power in specific cybersecurity segments, potentially hindering competition and innovation.
“The Commission has concerns that the proposed acquisition could lead to the creation or strengthening of a dominant position in certain markets,” the filing stated, adding that further investigation might be necessary.
This development raises uncertainty for the future of the deal. The EU Commission has three options:
- Clear the acquisition: This is unlikely if regulators believe the deal raises serious competition concerns.
- Clear the acquisition with conditions: This could involve requiring Cisco to divest certain assets or impose limitations on its behavior.
- Open a full-scale investigation: This would significantly delay the deal and could ultimately lead to its rejection.
Industry analysts believe the EU’s scrutiny reflects a growing concern about the concentration of power in the technology sector. Recent years have seen several large tech mergers face regulatory hurdles in Europe, including Microsoft’s acquisition of Activision Blizzard and Meta’s acquisition of Giphy.
“EU regulators are sending a clear message that they will scrutinize large tech mergers closely, particularly those that could potentially harm competition and innovation,” said Sarah Jones, an antitrust expert at the Brussels School of Competition.
Cisco has expressed confidence in securing regulatory approval, stating its commitment to working constructively with the EU Commission to address any concerns. However, the company also acknowledged the possibility of a prolonged review process.
“We remain confident that the proposed acquisition will ultimately benefit both companies and their customers,” said a Cisco spokesperson. “We are committed to working constructively with the EU Commission to address any concerns and ensure a timely resolution.”
The outcome of the EU review will be closely watched by the tech industry and could have wider implications for future large tech mergers.
Note: This article is based on publicly available information and does not represent any official statements from Cisco, Splunk, or the EU Commission.
