Daily Management Review

How AppDynamics was Swooped Upon and Nabbed at the Last Minute


How AppDynamics was Swooped Upon and Nabbed at the Last Minute
Top leaders of the software company AppDynamics  were back home in California for final visits with prospective shareholders even as the AppDynamics IPO roadshow hit its home stretch this week.
Pitching their story to about 100 investors was AppDynamics CEO David Wadhwani and CFO Randy Gottfried at a meeting at the Loews Regency Hotel in downtown San Francisco on Monday. Sources from the company said that after that the executives of the recently bought company hopped on a flight to Los Angeles for morning investor meetings the following day.
At the same time, getting ready to head to New York for the software developer's debut on the Nasdaq Stock Market, slated for Thursday were about 40 employees, including founder Jyoti Bansal and some board members.
The sources said that as AppDynamics raised the price range for the IPO on Tuesday and the deal was oversubscribed, investors were expressing enthusiasm.
However very few knew that at that very same time, busy in frantic negotiations on a sale to Ciso, an AppDynamics customer and technology partner, were the company's board members.
According to a blog post from Asheem Chandna, an AppDynamics board member and partner at venture firm Greylock Partners, Cisco CEO Chuck Robbins had quietly invited Wadwhani to his house to propose an acquisition in an effort to beat the clock. According to sources, the two companies came to a handshake agreement on Saturday after Cisco lobbed in an acquisition bid.
To allow Cisco just enough time to finalize an offer before the share sale, the companies agreed to a 72-hour negotiating period as it wasn't definitive enough to keep AppDynamics from going forward with the IPO.
And then on Tuesday afternoon, Cisco announced that they are buying AppDynamics for $3.7 billion after multiple bids.
"Cisco has been a customer of AppDynamics for a number of years," said Rob Salvagno, head of corporate development at Cisco, in a conference call on Wednesday. As a client and partner, "that just helped bring us closer and ultimately give us the confidence to move towards making this deal happen," he said.
One of the sources said that to jointly address the staff, Cisco's Robbins and Rowan Trollope, a senior vice president greeted Wadhwani and Gottfried when they returned to the AppDynamics office in San Francisco late Tuesday.
As the lead underwriters preparing for the offering, Morgan Stanley and Goldman Sachs were plugging along until shortly before the announcement. And closely following the first venture-backed tech IPO in three months were Silicon Valley venture capitalists and entrepreneurs.
AppDynamics hired Qatalyst Group, the investment advisory run by Frank Quattrone, to handle negotiations with Cisco. Under the leadership of Salvagno and Chief Strategy Officer Hilton Romanski, Cisco was running its side of the process from San Francisco and Silicon Valley. Cisco utilizing its internal corporate development group and tends to avoid outside bankers for mergers and acquisitions.
Due to AppDynamics’ expanding customer base, rapid revenue growth and general belief that it could thrive on its own, company insiders said the sale was described as "bittersweet", sources have said. It also meant that it would not launch the IPO.
But the in investors have little to complain as they are exiting at about twice the valuation that the IPO would've likely established at a purchase price of $3.7 billion in cash.