Case Study: NetScout Systems’ Transformative Acquisition

What a $2.3 billion acquisition means to the computer network management company and how the legal team supported the deal

In July 2015, NetScout, a leader in network, application, and service-assurance solutions, acquired from Danaher Corporation several operating companies in a deal valued at approximately $2.3 billion. As a result, NetScout’s revenue increased threefold, and its workforce more than tripled. As vice president, general counsel, and secretary, Jeff Levinson was at the center of the acquisition and worked with NetScout leaders to prepare the company for the transformative event while ensuring day-to-day legal operations continued. Levinson spoke with Modern Counsel about the details and motivations behind the acquisition.

Modern Counsel: What was involved in the acquisition of Danaher Corporation’s operating companies?

Jeff Levinson: Our CEO’s vision of “traffic-based instrumentation” of networks catalyzed this deal. The idea was to combine NetScout’s service assurance business with the Danaher companies: Tektronix Communications for a service provider, Arbor Networks for security, parts of Fluke Networks for enterprise, and their packet flow switch business. I think of our recent combination as a “Big Bang,” since this is transformative for our company and, I believe, the network
service-assurance industry.

MC: How does the acquisition diversify NetScout?

JL: It broadens our core technology portfolio and doubles our total addressable market. It accelerates our cyber intelligence and business intelligence analytics solutions. It gives us a stronger go-to-market platform in a very competitive world. And it allows us to improve operational efficiencies. I should underscore that last point because at NetScout we have a unique view of “lean,” which does not mean cutting employees. Instead, our CEO talks about being “lean but not mean.” These words resonate.       

MC: What did NetScout want from this deal?

JL: Technology innovation is a major driver. As a combined company, we will have more than a third of our employees in research and development. Our patented Adaptive Service Intelligence technology allows us to create innovative products that will support our customers at scale and in all sorts of environments. In the face of very tough competition, we will be able to accelerate our efforts in virtualization, cloud computing, voice over Internet Protocol (VoIP), video, and mobility. The acquired companies’ capabilities in network troubleshooting complement NetScout’s strengths in monitoring complex IP-based networks and mission-critical services that run across them.

MC: How long did the negotiation process take?

JL: We were working through tough issues in a compressed time. When we told our outside advisors how aggressive our timetable was, I could tell they were doubtful at best. But we held to our deadline, worked intensely, and were able to announce the deal on our timetable.

MC: What were the major challenges?

JL: The deal structure was complicated, and that presented a few challenges as we worked through it. Integration planning is always critical. A significant issue was the regulatory clearance in terms of time, effort, and the need to get it right. The Department of Justice notified us of their second request for additional information the day before Christmas 2014. It took until late April to obtain clearance.

MC: Who did you work with to get the deal done?

JL: Our CEO was determined and provided strategic direction and support and really drove the deal with decisiveness. We had a small team that worked through the critical issues, negotiated hard, and got to resolution quickly. Working closely with the executive team, I had good support as I worked through the acquisition negotiation and documents while my team split its time between transaction work and day-to-day work—the normal blocking and tackling—as I did. We got good advice from our outside counsel on the transaction documents and structure, international issues, and intellectual property, especially.

MC: What did you bring to the table?

JL: No one does this alone. Without experienced executives, high-performing lawyers, and capable outside advisors, we would have struggled. But when I think about the role of corporate counsel, I think of us as business lawyers. We have to be technically competent in substantive areas of the law and continually improve our domain expertise, but we also have to be grounded in management skills, such as project management, risk management, emotional intelligence, diversity and inclusion, and strategy, just like other business leaders. We need to be able to communicate calmly and clearly. At the core, we have to possess outstanding legal skills, business acumen, sound judgment—all underpinned by integrity. And, as with this transaction, sometimes you just have to be ready to boldly go, to take the leap, and to rely on your training.

MC: How will the acquisition change the company, and how will it change your role?

JL: We will be a different company with a different cadence, but we are both confident and realistic. We have an opportunity in the legal department to apply best practices, work with our law firms to reset the relationships and the processes—not just around fees, but around communications and project management and innovation. I have to scan the horizon for what’s coming, and I need people who think about our business. My goal is to continue to align with the business, provide sound guidance, help manage enterprise risk, build up the legal department along those lines, and improve every day.