Intel wants to sell a McAfee confidence business, that was acquired for $7.7 bn in 2010. And Symantec usually acquired Blue Coat for $4.7 billion.
As a confidence marketplace shakes adult in some-more ways than one, who wins, who struggles and who will get acquired next?
“The Symantec-BlueCoat transaction is a second largest MA transaction in story for craving security. The confidence marketplace chessboard is elaborating right before us,” pronounced Eric McAlpine, Founder of Momentum Partners, a Silicon Valley formed MA advisory organisation with a prolonged list of confidence deals.
“Symantec has paid handsomely to make a vital pierce to say a position as a personality in a space. While a title cost was indeed full by financial standards, it was a understanding structure that was some-more interesting, with oneness and support by dual really intelligent private equity firms with low knowledge investing in security,” McAlpine said.
Intel’s merger of McAfee for $7.7 billion in 2010 is a largest confidence transaction to date. Yet, a sale of Intel’s confidence business would doubtful fetch $7.7 billion now by any measure.
PE supports with an dilemma in confidence – Thoma Bravo, Bain Capital and Vista Equity Partners – might good advantage as a confidence chessboard shuffles. Vista Equity Partners usually acquired Ping Identity and Blue Coat was a PE stadium of sorts. Blue Coat was bought, sold, and bought again by PE firms (and finally sole it again…to Symantec) with any organisation creation out good with any flip.
(Source: 451 Research. *Estimated formed on multiples)
Bain Capital scarcely doubled their entrance value in usually over a year. While Bain has concluded to hurl over $750 million behind into a company, they’re now personification with residence money. Bain Capital’s timing for marketplace converging was mark on and their investment has paid off handsomely. By all accounts, Symantec has paid a large cost to sojourn relevant. Which begs a question…does ‘yellow’ and ‘blue’ make immature ($$$) for this tie up?
Symantec’s altogether business has mostly been driven by a Norton AntiVirus consumer confidence suite, that fetches roughly 50% of a revenues or $1.9 billion annually. But Norton is a timorous code in a struggling marketplace as consumers have flocked to giveaway or freemium offerings by AVG, AVAST, Malwarebytes, etc. The other half of a income comes from Symantec’s craving confidence offerings, that essentially embody of endpoint insurance and information detriment prevention.
With Blue Coat underneath a belt, Symantec gets a blank and many indispensable web and cloud confidence product portfolio. Symantec can now pierce an integrated craving apartment of offerings for web, email, endpoint, cloud, and network security, despite some of Blue Coat’s products are not as draining edge. Blue Coat itself has grown by merger and consolidation. The association sealed 11 acquisitions for scarcely $400 million in sum given 2007.
Value = Post income of a final spin Revenues + Growth rate + “X”
As a markets alleviate and consolidations start, acquirers are not looking usually during a post-money of a final financing round. “The MA markets value a multiple of marketplace leadership, income growth, predictability, and scale,”says McAlpine. “In a research, a association of income expansion to value alone is now a small 22%, that is historically low as valuations have traditionally correlated many aloft (70%+) to tip line growth. It’s as suave as ever to establish value in a context of MA as one contingency cruise a accumulation of factors over usually growth.”
Momentum Partners’ investigate of a Symantec / Blue Coat transaction highlights a value drivers of buyers-sellers and value drivers of confidence acquisitions.
Who’s Next In Line To Be Acquired?
When we take a tough demeanour during a heading confidence vendors like Cisco, IBM, Microsoft, and HP, any has employed MA to a opposite border to sojourn atop a confidence personality board.
Cisco has spent north of a billion dollars in a past 12 months to enlarge hazard insurance and network function investigate with a 2015 acquisitions of OpenDNS ($660 million) and Lancope ($453 million) giving Cisco a conduct start.
Cisco is also decoration adult a confidence services business with acquisitions like Portcullis and Neohapsis. Cisco’s assertive confidence MA viewpoint dates behind to 2013 with a $2.7 billion merger of Sourcefire during ~11x trailing twelve months revenues creation it a 4th largest confidence transaction (3rd during a time) in story and one of a priciest during a scale.
So what’s subsequent for Cisco? Should Cisco extend from a core networking confidence roots to a endpoint? Cisco has been rumored to flog a tires on FireEye as have some others. Other important endpoint players embody disruptive Cylance, that recently warranted a horn and unicorn standing lifting $100 million, as good as Tanium, CarbonBlack, and Invincea.
Or, will Cisco demeanour to pierce divided from hardware and burst into web gateways? Morgan Stanley and Gartner guess that cloud confidence will overtake on-prem expansion by orders of magnitude. Cloud confidence is flourishing during 19% CAGR for a subsequent 4 years as compared to a 3% CAGR for on-premise solutions.
The tip 3 companies in Gartner’s Magic Quadrant for Secure Web Gateway are Zscaler, Websense (now Forcepoint), and Blue Coat. With dual of a 3 now acquired (Websense was acquired for $1.9 billion by Raytheon in 2015), a nonesuch value increases for Zscaler, that is challenging cloud actor and a heading MA target. Symantec was rumored to be mulling an merger of Zscaler progressing this year.
Appliance vendors will be applicable for a foreseeable future, though cloud incumbents are increasingly a vital threat. Palo Alto Networks leads a Next Gen Firewall (NGFW) marketplace and a expansion rate has been really strong, despite display signs of deceleration recently. Palo Alto has used MA as a apparatus to extend over a network with a acquisitions of CirroSecure (cloud) and Cyvera (endpoint). CirroSecure gives it an dilemma in a swarming Cloud Access Security Brokers (CASB) space, while independents SkyHigh Networks and Netskope are fighting to benefit a bigger cut of a CASB pie. Two other important CASB vendors were acquired final year (Elastica acquired by BlueCoat for $280 million and Adallom acquired by MSFT for $290 million) giving any an early exit and large payday to their founders and investors.
The Endpoint Still Matters.
While craving endpoint insurance sounds antiquated, it still garners decent revenues for a likes of Intel Security (formerly McAfee) and Symantec. Innovators like Cylance and Crowdstrike, both valued above a billion dollars, are rebellious a endpoint confidence problem in novel (non-signature based) ways. Tanium has positioned itself as Endpoint Systems Management and is rumored to have deserted bids from VMWare and Palo Alto Networks.
The ‘Insider Threat’ Behavioral Security Gets Attention.
A new rising confidence difficulty famous as User Entity Behavior Analytics (UEBA) is rebellious a insider hazard problem (think Snowden) as good as supernatural network and endpoint function formerly undetected by existent confidence solutions. Founders and VCs have taken notice rising and appropriation a call of start-ups like Fortscale, Exabeam, RedOwl, and Securonix staid to take advantage of this fast expanding shred within security. Gartner predicts MA heat for UEBA vendors in 2016 after a warn merger of Caspida by Splunk ($190 million) final year.
Tying this behind to a endpoint, a endpoint is staid to spin contextual with identities, applications and user function patterns, that will expostulate converging within a endpoint, focus and confidence analytics vendors. The incomparable companies like IBM, Intel, Dell+EMC, HP, and CA will have to enlarge their portfolios with a innovators to stay applicable as record takes leaps forward.
Identity Makes A Comeback.
Identity and Access Management (IAM) has witnessed a likes of Okta, SailPoint, Thycotic, and Auth0 creation waves in this segment, including Ping Identity merger by Vista Equity. But what does Identity even meant in this day and age? And who cares? Compliance has been a motorist for IAM adoption nonetheless they are being pushed to broach more. Single Sign On (SSO) and earthy Two-Factor tokens do not indispensably cut it anymore.
Social identities subsequent from Google and Facebook are augmenting a need for some-more extensive next-gen solutions. Adaptive IAM and role-based entrance control is fast flourishing nonetheless mercantile value stays a challenge. With EU information residency manners entrance into effect, we will see some-more opportunities arise. Key Management will be constituent offerings during a infrastructure layer. Access control to applications and services in energetic environments is an event that has nonetheless to be tapped in a suggestive manner. Okta has reportedly hired Goldman Sachs to ready for an IPO. Will they select a Blue Coat lane and sell instead?
Automate and Orchestrate, Or Else.
The expansion of indicate solutions, formation / process hurdles and necessity of talent will expostulate a need for automation tools. By 2019 there will be a need for 6 million confidence professionals predicts (ISC)2, though usually 4.5 million will have a required education for those jobs. Earlier this year FireEye was initial to lift a MA trigger and acquired Invotas, that has spin their adaptation heart to assist with confidence organisation fatigue. Several other startups are fast building automation / AI offerings.
Below is a demeanour during some of a vital confidence segments and their incumbents who contingency stay applicable by product growth and/or MA. Meanwhile a innovators are looking to interrupt them rapidly.
Beyond The Traditional Buyers
As a subsequent call of confidence innovations occur, we will see underlying trends of low training automation constituent to a draining dilemma products. Cloud security, information confidence and VM / microservices confidence are flourishing categories in and of themselves, and underneath it all, and DevSecOps is a new thing already.
These newer segments will emanate new opportunities, that in spin will pierce new courtesy by new and normal acquirers alike. Cloud / information core providers like AWS and Microsoft will build out their portfolio as a marketplace grows. The Telcos are pulling for a cut of this pie. SingTel’s $800 million Trustwave merger is demonstrative of this trend as was NTT’s merger of Solutionary. And while defense contractors have a mottled story in security, they recently have gotten prohibited for a zone including Raytheon (via Websense/Forcepoint), Thales (acquired Vormetric for $400 million) and BAE Systems (acquired SilverSky for $233 million) to build adult their confidence offerings.
And The Winners Will Be…
Cisco clearly is forward of a container in this confidence chess game. Symantec usually bought a new life line. Or it bought a CEO for $4.7 billion depending on how we demeanour during it. And Greg Clark is no foreigner to acquisitions so it’s approaching that Symantec will continue a selling debauch once a dirt settles.
In another corner, IBM – a Bigger ‘Blue’ – is raid with a possess hurdles and moves slowly, though has a money fight chest and a possess considerable multi-billion dollar MA lane record in confidence (ISSX, Q1 Labs, Trusteer). It many recently acquired Resilient Systems to strengthen a Automation Incident Response capability. Yet a association has some belligerent to cover. Its Watson AI meme could play out if it can get a act together.
Even as Intel gets out of a business, HP and Juniper have been mostly incompetent to conflict in any estimable manner. The former undergoing a vital corporate mutation and a latter being mostly wordless in confidence MA given their merger of Netscreen. Juniper acquired Netscreen in 2004 for a whopping $4 billion, creation that still a 3rd largest confidence understanding of all time.
And afterwards there’s Microsoft who had historically had a terrible record in confidence underneath before CEOs. However, Satya Nadella says no more. Microsoft has committed to spend $1 billion annually on a ‘holistic’ confidence strategy. This includes acquisitions, employing new execs, building a new state of a art facility, and formulating a new confidence organisation within Microsoft.
Yet a elephant in a room is clearly Amazon. The ‘AWS effect’ on confidence is surpassing and companies like vArmour have taken advantage. Amazon has built adult a possess portfolio of simple confidence collection (such as AWS WAF, CloudHSM, Cloudwatch and IAM) mostly by partnerships and in together combined an AWS confidence marketplace of over 200 confidence vendors.
It’s a shining play. Amazon will win no matter how a vendors thrive, tarry or pile-up and burn. Other companies like Intel might divest, some will overpay, acquire, integrate, and disintegrate while AWS will giggle a approach to a bank. In this $75 billion marketplace flourishing to $170 billion by 2020, a winner’s round will enhance over usually PE firms.
(The author gratefully acknowledges a organisation during Momentum Partners for providing information and investigate for this post.)