Key Takeaways
Dealmaking in cybersecurity has jumped in recent months, likely an effect of remote working trends and heightened cybersecurity awareness from Russia’s invasion of Ukraine.
Big moves in private equity this week included Thoma Bravo acquiring SailPoint Technologies for $6.9 billion and turning around to sell one of its portfolio companies, Barracuda Networks, to KKR & Co.
Tech companies are also adding to the deal frenzy with Kaseya and Google acquiring cybersecurity firms Datto and Mandiant respectively.
Private Equity Deals
SailPoint Technologies announced on Monday that they were being acquired by private equity firm Thoma Bravo for $6.9 billion. SailPoint began trading on the NYSE in 2017 and will be taken private by Thoma Bravo who is paying shareholders $65.25 per share in cash (a 31.6% premium as of last Friday’s closing price). Thoma Bravo will add SailPoint to a list of key acquisitions it has already made in the cybersecurity space including the companies Proofpoint (for $12.3 billion in 2021), Barracuda Networks (for $1.6 billion in 2018), and Sophos (for $3.9 billion in 2020).
Mark McClain, founder and CEO of SailPoint, said about the transaction, "The transaction will also allow us to pursue our long-term growth trajectory with greater flexibility and effectiveness to support our customers, expand our markets, and accelerate innovation in identity security with the backing of a strong financial partner with deep sector expertise.” A major priority on their product roadmap is to turn their identity security product into a SaaS.
One day after the announcement of the SailPoint deal, KKR & Co., another private equity company, announced it would be buying Barracuda Networks from Thoma Bravo. The deal is valuing Barracuda Networks at $4 billion, which means a $2.4 billion increase since Thoma bravo bought it in 2018. KKR has $471 billion of assets under management and has investments in other cybersecurity companies including ForgeRock, Ping, Cylance, and DarkTrace.
Identity and Access Management (IAM) Trend
SailPoint delivers identity management solutions and is not the only monster deal in that sector recently. Okta, another big player in the IAM space, acquired Auth0 in a $6.5 billion deal less than a year ago.
IAM has become a hot demand because of the COVID-19 pandemic’s forced creation of hybrid workforces. As more companies moved their systems to the cloud and employees began accessing company networks from all over the world and with personal devices, the need for stronger, more agile IAM has pushed big revenue and huge deals in this sector. Also, the Russian invasion of Ukraine has underscored the heightened cybersecurity threat facing US enterprises from both nation-state attacks and criminal ransomware gangs.
Big Tech Acquiring Cyber Companies
Datto, another security solutions provider, is also being taken private by a $6.2 billion deal led by private equity company Insight Partners. Datto is officially being acquired by Kaseya, an IT giant who was hit by a major ransomware attack last year, but the deal’s funding is led by Insight Partners with participation from TPG and Temasek. This deal offers a 52% premium to stockholders.
Google also announced in March that it would buy cybersecurity company Mandiant for around $5.4 billion. Google was looking to boost its cloud security, a move that could force cloud rivals Microsoft and Amazon to also ramp up security. Mandiant focuses on cyber-incident response and cybersecurity testing, and saw one of its competitors, FireEye, get bought for $1.2 billion by private equity firm Symphony Technology Group.
Takeaways
2021 was a gloomy year for cybersecurity. It seemed like every week we were reading headlines about ransomware, critical infrastructure attacks, and supply chain attacks. All of this news, bad as it was, brought cybersecurity conversations to board rooms and CISOs got a bigger budget to do their job. This meant more spending on cybersecurity products which means more revenue and more attention from private equity. While these big priced deals are a logical consequence of last year’s catastrophes, it is still exciting to watch it all happen in such a frenzy.