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Why the $3.7 billion AppDynamics acquisition happened right before IPO



Applications management company AppDynamics was just wrapping up the final touches on its initial public offering when they learned that Cisco was interested in discussing a potential deal, after preliminary talks were abandoned in November. The discussion picked up again last week, and the IPO was slated to price tomorrow.

Although many companies seek acquisition offers in the months leading up to an IPO, also known as a “dual-track process,” that wasn’t what happened with this one. Investment banking firm Qatalyst, decided to play matchmaker and floated the idea to Cisco, a source with knowledge of the deal tells TechCrunch.

Fast forward to today, where the company announced a $3.7 billion deal. We’re told things were just decided on Saturday, and they had about 48 hours to complete the paperwork. (This is fast…very fast).

The IPO would have valued AppDynamics at around $2 billion, or close to the $1.9 billion the company was valued at its last private round. While it’s possible the stock would have risen, AppDynamics leaders liked the bird in hand.

Competitor New Relic went public a little over two years ago and is still trading near where it was at on its first day.

With clients like IBM and Salesforce, Cisco saw opportunity to grow its enterprise IT business. Cisco has been known to make billion-dollar purchases, such as when it acquired Jasper Technologies last year. 

This would have been the first tech IPO of the year. AppDynamics was expected to kick off a spate of tech IPOs for 2017, a contrast from last year’s dry spell. Its management had been talking publicly about its IPO plans since for several years.

AppDynamics has raised more than $300 million in funding over the past eight years and its largest shareholders are Greylock Partners and Lightspeed Venture Partners, which each owned 20.8 percent of the company.

 

 



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