How a change at the top got Juniper back into the M&A market

Contact: Brenon Daly

When Kevin Johnson arrived to take the top spot at Juniper Networks in September 2008, the networking giant hadn’t done an acquisition in nearly three years. Historically, the company had been a sporadic buyer of adjacent technologies, such as WAN optimization (Peribit Networks) and application acceleration (Redline Networks), but had stumbled badly in its $4bn ‘convergence’ play with NetScreen Technologies in 2004.

Although deal flow didn’t immediately start gushing when Johnson took over, investment bankers at the time noted that Juniper had begun taking meetings again, indicating the company was inching back toward the M&A market. The first deal under Johnson’s tenure – the $69m reach for Ankeena Networks – came in April 2010. Johnson announced earlier this week that he’d be stepping down from the CEO post as soon as a replacement is hired.

Since that print, if we had to characterize Juniper’s approach to M&A, we would call it ‘measured.’ Over the past three years, the chastened company has been clipping along at an average of three acquisitions per year, with an average price tag of about $80m.

Further, fully three of the eight companies that Juniper has acquired recently have been ones it previously put money into through its investment arm. That’s a relatively conservative approach to dealmaking, and certainly a much higher rate of ‘try before you buy’ than any other corporate venture program.

But then, given where the company was coming from, it was probably prudent for Johnson to move Juniper slowly along in its corporate development program. Nonetheless, the deliberate pace of Juniper’s M&A activity stands out when compared with rival Cisco Systems.

In the same previous three years that saw Juniper spend a total of $650m on eight acquisitions, Cisco dropped an astonishing $11bn on 29 companies, including writing checks of more than $1bn for three separate companies. Granted, Cisco has about 10 times the revenue – and 10 times the market cap – of its rival. Nonetheless, the discrepancy in dealmaking between the two networking rivals is striking.

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