Signal Hill Q2 2013 IT Security Market Snapshot
Don More
Managing Director [email protected]
Matt Fiore
Director [email protected]
www.signalhill.com
B a l t i m o r e │ B a n g a l o r e │ B o s t o n │ N a s h v i l l e │ N ew Y o r k │ R e s t o n │ S a n F r a n c i s c o
Eric Wagner
Managing Director [email protected]
Contents
2
Signal Hill at a Glance………………………………….………………………………………………..… 3
Signal Hill’s IT Security Practice M&A Overview………….………………..………………………….. 4
Q2 2013 IT Security M&A Overview…………………………..……………..……………..................... 5
Notable Q2 2013 IT Security M&A Transactions…………………………..……………..................... 6
All Q2 2013 IT Security M&A Transactions……………………...…………..……………..................... 7
Q2 2013 IT Security Public Company Valuation Metrics….…………………………………………. 9
LTM Relative IT Security Stock Price Performance…………….…………..………………………….. 10
Q2 2013 IT Security Financing Snapshot………………………..………….………………….……….. 11
Signal Hill at a Glance Signal Hill is a leading independent advisory boutique serving the M&A advisory and private capital raising needs of
growth companies. Signal Hill's experienced bankers provide deep domain expertise and an unyielding
commitment to clients in our sectors: Internet & Digital Media, Internet Infrastructure, Services and Software. With
over 500 completed transactions and offices in Baltimore, Bangalore, Boston, Nashville, New York, Reston and San
Francisco, Signal Hill leverages deep strategic industry and financial sponsor relationships to help our clients
achieve Greater Outcomes®.
Recent Mergers & Acquisitions, Strategic Advisory Transactions Mergers &
Acquisitions
Equity Private
Placements
Debt Advisory
Strategic
Advisory
Special
Committee
Advisory
Fairness
Opinions
3
Select Signal Hill IT Security Transactions
4
has been acquired by
The undersigned acted as financial advisor to e-DMZ
in connection with this transaction.
February 2011
has been acquired by
The undersigned served as financial advisor to UTM
Vendor in connection with this transaction.
February 2011
UTM Vendor
Large Public Security Vendor
has been acquired by
The undersigned acted as financial advisor to
Passlogix in connection with this transaction.
October 2010
has merged with
The undersigned rendered a fairness opinion to the
Board of AuthenTec in connection with this
transaction.
September 2010
has been acquired by
The undersigned acted as financial advisor to
ClearPoint Metrics PLC in connection with this
transaction.
January 2011
has been acquired by
The undersigned served as financial advisor to Akonix
in connection with this transaction.
August 2008
has merged with
The undersigned served as financial advisor to
Marshal in connection with this transaction.
November 2008
has been acquired by
The undersigned served as financial advisor to
SwapDrive in connection with this transaction.
June 2008
has acquired
The undersigned acted as co-manager to Perimeter
eSecurity in connection with this transaction.
January 2008
has been acquired by
The undersigned served as financial advisor to
Securify in connection with this transaction.
September 2008
has been acquired by
The undersigned acted as exclusive financial advisor
to Consul Risk Management in
connection with this transaction.
January 2007
received strategic investment from
The undersigned served as financial advisor to Intego
in connection with this transaction.
June 2007
has acquired
The undersigned acted as exclusive financial advisor
to SurfControl in connection with this
transaction.
July 2006
has been acquired by
The undersigned acted as exclusive financial advisor
to Tenebril in connection with this transaction.
August 2006
has acquired
The undersigned acted as exclusive financial advisor
to Protiviti in connection with this transaction.
December 2006
has been acquired by
The undersigned acted as exclusive financial advisor
Compliance 360 in connection with this
transaction.
January 2012
received an investment from
The undersigned initiated the transaction on behalf
of Solutionary.
November 2011
has been acquired by
The undersigned acted as financial advisor to iJet
International in connection with this
transaction.
May 2011
has been acquired by
The undersigned acted as financial advisor to
Approva Corporation in connection with this
transaction.
September 2011
has been acquired by
The undersigned acted as financial advisor to
ChosenSecurity in connection with this
transaction.
February 2010
has been acquired by
The undersigned acted as financial advisor to
SafeNet Inc. in connection with this transaction.
February 2010
Embedded Security Solutions acquired the assets of
The undersigned served as financial advisor to Pareto
Logic in connection with this transaction.
March 2009
has been acquired by
The undersigned served as financial advisor to
Orchestria in connection with this transaction.
January 2009
has been acquired by
The undersigned served as financial advisor to Exploit
Prevention Labs in connection with this
transaction.
December 2007
has been acquired by
The undersigned served as financial advisor to
Netcontinuum in connection with this
transaction.
July 2007
has merged with
The undersigned acted as financial advisor to
Perimeter eSecurity in connection with this
transaction.
August 2007
has been acquired by
The undersigned acted as financial advisor to
SurfControl PLC in connection with this
transaction.
October 2007
has been acquired by
The undersigned acted as exclusive financial advisor
to Aluria Software in connection with this
transaction.
August 2005
has acquired
February 2006
The undersigned acted as exclusive financial advisor
to Perimeter Internetworking in
connection with this transaction.
has been acquired by
The undersigned acted as exclusive financial advisor
to Pest Patrol in connection with this
transaction.
August 2004
has been acquired by
The undersigned acted as exclusive financial advisor
to TruSecure in connection with this transaction.
February 2003
has acquired
The undersigned acted as exclusive financial advisor
to Perimeter Internetworking in
connection with this transaction.
October 2003
has been acquired by
The undersigned acted as exclusive financial advisor
to N2H2 in connection with this transaction.
October 2003
Includes Previous Experience
July 2009 May 2010
October 2012
has been acquired by
has been acquired by has been acquired by
Q2 2013 IT Security M&A Overview The IT Security sector continued its upward trend in Q2 2013, resulting in a 67 percent increase in
the number of announced M&A transactions versus the prior quarter, and a doubling over the
prior-year quarter. Total announced Enterprise Value (EV) of companies acquired in Q2 2013
quintupled over Q1 2013 and tripled over the prior-year quarter – this can be attributed to two
major announced deals: Websense/Vista Equity Partners at $903M and Stonesoft/McAfee at
$389M. The quarterly EV/LTM Revenue median valuation multiple remained steady over the
prior quarter and well above last year – as important, we see continuing examples of high-
multiple deals as buyers pay for scarcity and performance leadership.
We are optimistic that volumes and valuations will continue showing robustness in second half
2013 as evidenced by the Aveska/EMC transaction that closed in early July 2013 and the just-
announced pending acquisition by Cisco of Sourcefire – both large, high-multiple transactions.
5
Source: Signal Hill Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013
Number of Deals 18 33 40 21 35
% change from prior quarter - 83.3% 21.2% -47.5% 66.7%
Total Announced Enterprise Value ($M) $628.0 $2,957.8 $739.9 $335.0 $1,883.0
% change from prior quarter - 371.0% -75.0% -54.7% 462.1%
Median Announced Deal Size ($M) $130.0 $24.0 $40.0 $125.0 $30.0
% change from prior quarter - -81.5% 66.7% 212.5% -76.0%
Median EV/TTM Revenue Multiple 2.5x 3.8x 1.3x 3.3x 3.2x
% change from prior quarter - 34.2% -200.6% 153.8% -3.0%
Selected IT Security Transactions, Q2 2013 (1)
N-able Technologies
acquired by SolarWinds
EV: $120.0M
Revenue Multiple: 5.0x
N-able, a leading global prov ider of complete IT management and
Automation solutions for Managed Serv ice Prov iders (MSPs), has
been acquired by SolarWinds, a leading prov ider of powerful and
affordable IT management software. The acquisition will enhance
SolarWinds’ remote monitoring and management (RMM) offerings
and will add MSP serv ice automation to the range of its IT
management solutions.
Solera Networks
acquired by Blue Coat
Systems
EV: $225.0M
Revenue Multiple: 18.8x
Solera Networks, the industry’s leading prov ider of big data security
intelligence and analytics for advanced threat protection, has been
acquired by Blue Coat Systems, the market leader in business
assurance technology. Solera’s real-time intelligence, security
visibility and forensic capabilities, combined with Blue Coat’s
comprehensive Web-based threat intelligence capabilities, will give
their clients the tools necessary to proactively block threats, respond
to and recover from data breaches and other incidents.
Solutionary acquired
by NTT
Solutionary, a leading pure-play enterprise Managed Security
Serv ices Prov ider, has announced it will be acquired by Nippon
Telegraph and Telephone Corp. (NTT), the world’s largest global IT
and telecommunications serv ices company. The acquisition will
enhance Solutionary’s continued global expansion, ongoing R&D
and worldwide security intelligence capabilities.
Stonesoft Oyj acquired
by McAfee
EV: $389.0M
Revenue Multiple: 7.4x
Stonesoft, a publicly-traded company in Finland that delivers
software-based, dynamic, customer-driven cyber security solutions
that secure information flow and simplify security management, has
been acquired by McAfee. McAfee, a wholly owned subsidiary of
Intel Corporation, is a prov ider of broad security solutions and
serv ices for systems, networks and mobile dev ices around the world.
Websense acquired by
Vista Equity Partners
EV: $902.8M
Revenue Multiple: 2.5x
Websense (NASDAQ: WBSN), a global leader in protecting
organizations from the latest cyber attacks and data theft, has been
acquired by Vista Equity Partners, a U.S.-based private equity firm
with $7B in capital committed to technology-based organizations.
Notable IT Security Transactions
(1) Includes deal metrics where publicly available 6
Q2 2013 IT Security M&A Transactions
7
Date Announced
Seller Buyer Enterprise
Revenues EBIT EBITDA Enterprise Value
Value Revenue EBIT EBITDA
25-Jun-13 Palisade Systems / Assets Absolute Software NA NA NA NA NA NA NA
20-Jun-13 Perlego Systems, Inc. Fixmo Inc. NA NA NA NA NA NA NA
20-Jun-13 ZeroVulnerabilityLabs, Inc. Malwarebytes Corporation
NA NA NA NA NA NA NA
19-Jun-13 Exacq Technologies, Inc. Tyco International Ltd. $150.0 NA NA NA NA NA NA
17-Jun-13 Solutionary, Inc. NTT Communications Corp.
NA NA NA NA NA NA NA
14-Jun-13 NetResult Thomson Reuters Corporation
NA NA NA NA NA NA NA
10-Jun-13 Fox Technologies Parallax Capital Partners, LLC
NA NA NA NA NA NA NA
5-Jun-13 StillSecure / Managed Security Services division
SilverSky NA NA NA NA NA NA NA
5-Jun-13 MobileScope Evidon, Inc. NA NA NA NA NA NA NA
30-May-13 Vigilant LLC / Assets Deloitte LLP NA NA NA NA NA NA NA
30-May-13 RedCloud Security Inc Avigilon Corporation $17.0 NA NA NA NA NA NA
22-May-13 Solera Networks, Inc. Blue Coat Systems, Inc. $225.0 $12.0 NA NA 18.8x NA NA
21-May-13 N-able Technologies SolarWinds, Inc. $120.0 $24.0 $1.0 NA 5.0x 120.0x NA
21-May-13 PrivacyChoice AVG Technologies NA NA NA NA NA NA NA
20-May-13 Websense Inc. Vista Equity Partners $902.8 $359.4 $34.3 $54.4 2.5x 26.3x 16.6x
20-May-13 Cronto Ltd. VASCO Data Security International, Inc.
$21.9 NA NA NA NA NA NA
17-May-13 Third Defense Inc. Caliber Security Partners
NA NA NA NA NA NA NA
15-May-13 SyncDog Inc IntegriCell Group NA NA NA NA NA NA NA
14-May-13 FuGen Solutions, Inc. 8K Miles $7.5 NA NA NA NA NA NA
14-May-13 Sense Security Tech / security & biometric assets
Homeland Security Corporation
NA NA NA NA NA NA NA
14-May-13 Feedback Data plc Belgravium Technologies plc
$0.9 NA NA NA NA NA NA
Q2 2013 IT Security M&A Transactions
8
Date Announced
Seller Buyer Enterprise
Revenues EBIT EBITDA Enterprise Value
Value Revenue EBIT EBITDA
10-May-13 Earthwave Corporation Pty Limited Dimension Data Holdings plc
NA NA NA NA NA NA NA
9-May-13 Netronome / SSL Inspector appliance product line
Blue Coat Systems, Inc. NA NA NA NA NA NA NA
8-May-13 FlexPoint Technology Haystax Technology NA NA NA NA NA NA NA
6-May-13 Stonesoft Oyj McAfee Inc $389.0 $52.7 ($1.5) ($0.6) 7.4x NA NA
1-May-13 myON-ID Media GmbH AVAST Software a.s. NA NA NA NA NA NA NA
29-Apr-13 Arkoon Network Security / 84% stake Cassidian CyberSecurity
$18.8 $17.2 NA $2.4 1.1x NA 7.7x
16-Apr-13 Digital Sandbox, Inc. Haystax Technology NA NA NA NA NA NA NA
15-Apr-13 ZeoBit LLC / MacKeeper and PCKeeper assets
Kromtech Alliance Corporation
NA NA NA NA NA NA NA
9-Apr-13 Mail Distiller Proofpoint NA NA NA NA NA NA NA
9-Apr-13 Shavlik Technologies, LLC LANDesk Software $30.0 NA NA NA NA NA NA
4-Apr-13 Data Security Systems Solutions Pte Ltd.
Gemalto NV NA NA NA NA NA NA NA
3-Apr-13 RSA Security, Inc. / KBA technology LexisNexis Risk Solutions NA NA NA NA NA NA NA
3-Apr-13 Three Laws Mobility, Inc. BoxTone NA NA NA NA NA NA NA
IT Security Public Companies – Trading Statistics
9
% Dec./Inc. Fully Fully Enterprise Value / Revenues
Market Price from LTM Diluted Revenue Diluted Revenue EBITDA
Segment Company 6/30/2013 High Low Eq. Val. LTM CY '13E CY '14ENet Cash Ent. Val. LTM CY '13E CY '14E LTM CY '13E CY '14E
Security Bellwether
Content Symantec Corp. $22.48 (11.0%) 72.2% $15,660 $6,906 $6,909 $7,146 $1,656 $14,004 2.0x 2.0x 2.0x 7.4x 6.3x 5.3x
SVM Check Point Software Technologies Ltd.$49.68 (6.3%) 22.4% $9,759 $1,364 $1,398 $1,487 $1,385 $8,374 6.2x 6.0x 5.6x 10.9x 10.3x 9.6x
IAM Gemalto N.V. $90.43 (8.4%) 22.9% $7,603 $2,961 $3,195 $3,567 $439 $7,164 2.5x 2.2x 2.0x 16.1x 13.1x 11.0x
Content Trend Micro Inc. $31.74 (8.6%) 56.7% $4,186 $1,030 $1,077 $1,089 $1,201 $2,985 3.1x 2.8x 2.7x 8.8x 9.2x 9.1x
SVM Palo Alto Networks, Inc. $42.16 (41.9%) 7.9% $2,999 $359 $461 $622 $362 $2,637 7.3x 5.7x 4.2x NM NM 26.1x
SVM Fort inet Inc. $17.50 (38.0%) 6.3% $2,839 $552 $600 $686 $460 $2,379 4.3x 4.0x 3.5x 21.7x 17.8x 14.5x
SVM Sourcefire Inc. $55.55 (6.6%) 40.6% $1,727 $233 $278 $336 $206 $1,521 6.5x 5.5x 4.5x NM 27.8x 22.0x
Content AVG Technologies N.V. $19.45 (2.6%) 106.5% $1,051 $378 $419 $473 ($14) $1,066 2.8x 2.5x 2.3x 9.0x 7.8x 7.0x
SVM Imperva Inc. $45.04 (0.9%) 87.5% $1,104 $111 $136 $167 $111 $993 8.9x 7.3x 6.0x NM NM NM
Content Proofpoint, Inc. $24.25 (1.4%) 148.2% $826 $112 $129 $152 $87 $740 6.6x 5.7x 4.9x NM NM NM
SVM Qualys, Inc. $16.12 (1.6%) 58.8% $511 $95 $108 $125 $91 $420 4.4x 3.9x 3.4x 39.7x 25.0x 18.8x
Content Ahnlab Inc. $44.54 (63.3%) 57.2% $385 $119 NA NA $59 $325 2.8x NA NA 19.7x NA NASVM
Median 4.4x 4.0x 3.5x 13.5x 11.7x 11.0x
Mean 4.8x 4.3x 3.7x 16.7x 14.7x 13.7x
Security Small Cap
Content F-Secure Oyj $2.76 0.0% 51.4% $428 $201 $213 $228 $51 $378 1.8x 1.8x 1.7x 8.8x 8.0x 7.2x
Content Zix Corp. $4.23 (2.1%) 76.3% $262 $45 $49 $57 $24 $238 5.3x 4.8x 4.2x 23.8x 17.9x 13.6x
SVM Absolute Software Corp. $6.48 (8.9%) 95.1% $272 $81 $82 $95 $47 $225 2.9x 2.8x 2.4x 15.7x 16.3x 13.0x
IAM Vasco Data Security International Inc.$8.31 (20.2%) 27.6% $321 $157 $162 $173 $105 $217 1.4x 1.3x 1.2x 8.6x 8.4x 7.1x
Content CommTouch Software Ltd. $3.21 (19.5%) 62.1% $85 $26 $34 $42 $5 $80 3.1x 2.3x 1.9x NM 21.4x NA
Content Wave Systems Corp. Cl A $1.20 (75.0%) 0.0% $35 $28 $28 $31 $1 $34 1.2x 1.2x 1.1x NM NA NA
IAM Bio-key International Inc. $0.38 (7.8%) 656.0% $33 $3 NA NA ($0) $33 10.2x NA NA NM NA NA
SVM Intrusion Inc. $0.73 0.0% 809.7% $9 $7 NA NA ($4) $13 1.8x NA NA 28.5x NA NA
Content Edgewave Inc $0.25 (34.2%) 1150.0% $4 $17 NA NA ($7) $11 0.7x NA NA NM NA NA
Median 1.8x 2.0x 1.8x 15.7x 16.3x 10.1x
Mean 3.2x 2.4x 2.1x 17.1x 14.4x 10.2x
Content – antimalware, antivirus, email web filtering, data security and related threat protection segments. IAM – identity & access management solutions. SVM – Network Security & Vulnerability Management including IDS/P, firewalls, and vulnerability management
7/12 9/12 11/12 1/13 3/13 5/13 7/13-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
24.22%
31.74%31.13%
NASDAQ Composite Index
Signal Hill Bellwether Index
Signal Hill Small Cap Index
LTM Relative IT Security Stock Price Performance
10
LTM Relative Stock Price Performance
11
Select Q2 2013 IT Security Financing Activity
Company Investor(s) Deal
Value
Round
Number
Crocus Idinvest, Industrial Investors, Sofinnova, Others $45.0 D
Vaultize Tata Capital Innovations Fund - -
Vormetric Quicksilver Ventures, JK&B Capital, Sigma Partners, Split Rock Partners $15.0 -
Secualert Sequoia Capital, Norwest Venture Partners $10.0 -
Metacloud Canaan Partners, AME Cloud Ventures, Storm Ventures $10.0 A
Zetta.net Industry Ventures, Foundation Capital, Sigma $8.0 B
Disconnect FirstMark Capital $3.5 A
AlienVault Adara Venture Partners (Teldat Group and Neotec to invest soon) $4.0 1
FireHost The Stephens Group, LLC $12.0 D
Easy Solutions Medina Capital $11.0 B
AlephCloud Handbag, LLC $7.5 B
Carbon Black The Blackstone Group - -
IT-Ernity GMT Communications and Veronis Suhler Stevenson - -
AirWatch Accel Partners $25.0 2
PerspecSys Inc. Paladin Capital Group, Ascent Venture Partners and Intel Capital $12.0 B
Halon Security Almi Invest, Chalmers Innovation - 1
OpenDNS Sutter Hil l Ventures - B
Ionic Security Kleiner Perkins Caufield & Byers with TechOperators, Ken Levine and Dr. Paul Judge
$9.4 1
Nexgate Sierra Ventures $3.5 1
12
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