1 acquires A Closer Look At The Second Largest Cybersecurity M&A Transaction In History Advisors & Dealmakers In Cybersecurity. Momentum Partners, LLC Advise. Network. Invest.
Symantec Acquires Blue Coat In Second Largest Cybersecurity Transaction Symantec Not Only Acquires Blue Coat, Acquires CEO In A $4.65B All Cash Deal. Transaction Overview Blue Coat Overview Date: EV / LTM Rev: 6/12/2016 7.8x HQ: Sunnyvale, CA // Founded: 1996 CEO: Greg Clark (Now CEO of Symantec) Customers: 15,000 In December 2011, Thoma Bravo acquired Blue Coat and took company private for $1.3B. In March 2015, Bain Capital acquired Blue Coat from Thoma Bravo for $2.4B. Acquires EV / LTM EBITDA: Private Equity Support: NM Network Security Cloud + + Platform Capabilities Protect Cloud and On- Premise Assets Respond Rapidly to Security Incidents Protects enterprises and its users from cyber threats Defend Against Advanced Threats Manage Encrypted Traffic Enterprise Security $4.65 Billion Advanced web and cloud security Encrypted traffic management Network performance and optimization Optimize Network Performance Leverage Cloud to Protect the Cloud Transaction Funding Symantec acquires Blue Coat for $4.65B in an all cash deal Silver Lake makes an additional $500M investment into Symantec (doubling their investment to $1B) Bain Capital to reinvest $750M to help fund the deal Additional $2.8B raised in the form of debt for acquisition Top 5 Cybersecurity Transactions by Value Date Announced Acquirer Target Deal Value ($B) EV / LTM Rev August 19, 2010 $7.7 3.4x June 12, 2016 $4.7 7.8x February 9, 2004 $4.0 14.3x July 23, 2013 $2.7 10.7x March 10, 2015 $2.4 3.8x Source: Company press releases and websites, 451 Research. 1
The Market Continues To Value Scale, Predictability, & Profitability Symantec s Acquisition of Blue Coat Is A Prime Example. 9.0x 8.0x Check Point $14,461 mn Proofpoint $2,631 mn Splunk $7,526 mn Palo Alto Networks $11,670 mn 7.0x $3,073 mn (1) CyberArk $1,527 mn EV / Revenue 2016E 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x AVG $989 mn Barracuda $774 mn MobileIron $273 mn F-secure $466 mn Imprivata $349 mn Qualys $1,121 mn Mimecast $582 mn Trend Micro $4,695 mn Fortinet $5,794 mn FireEye $2,567 mn Imperva $1,260 mn Rapid7 $588 mn R 2 By Quarter Current: 22.2% Q4: 29.2% Q3: 63.2% Q2: 68.4% 0.0x 0% 5% 10% 15% 20% 25% 30% 35% 40% 2015-16E Revenue Growth High Growth Cybersecurity Low Growth Cybersecurity (1) Note: Size of the bubble indicates Market Cap (Equity value in the case of Blue Coat). In USD; Market data as of June 15, 2016. Source: Capital IQ. 2
Strategic Moves For Competitive Advantage Accelerating The Landscape Of Buyers For Cybersecurity Companies Has Expanded Over Time. Cybersecurity IT Notable Deals By Sector Defense IT PE 1/16: $275M / 6.9x 11/15: $280M / NA 10/15: $400M / 7.5x 11/15: $78M / NA 10/15: $71M / NA 4/15: $1.9B / NA 10/15: $453M / NA 7/15: $190M / NA 10/14: $233M / 3.0x Defense ISP Industrial Industrial / IoT ISP PE 1/16: NA / NA 10/15: $9M / NA 8/15: NA / NA Most Active Acquirers 12/14: $710M / 6.0x 7/15: NA / NA 4/15: $200M / 3.3x 7/14: NA / NA 4/15: $786M / 3.6x 3/15: $2.4B / NA Source: Momentum Partners. 3
Cybersecurity M&A: A Closer Look At Deal Value & Multiples The Combination of Blue Coat s Deal Value & Valuation Multiple Are Rare Air. M&A By Deal Size M&A By Valuation Multiples (EV / LTM Rev) 55% 50% 45% 40% 48% 85 35% 30% 25% 27% 30% 26% 35% 30% 25% 20% 15% 10% 5% 0% $247M Median Deal Size For >10x 16% 13% 29 11% 7% 23 19 6% 12 11 >$0M - $50M $50M - $100M $100M - $250M $250M - $500M $500M - $1B $1B+ 20% 15% 10% 5% 0% 24 22 27 18% >0.0-3.0x 3.0x - 5.0x 5.0x - 10.0x 10.0x+ 24 11 16 The median exit enterprise value for Cybersecurity exits since 2010 is $65M M&A exits in Cybersecurity are typically below $100M 60%+ of the time Exits above $1B are quite rare representing 6% of all deals (3 public, 6 private and 2 spin-out) Contemplated transactions are increasingly falling into two categories: Transformational (a la Symantec/Blue Coat) Opportunistic (rationalizing valuation and cooling funding markets) Valuations for M&A exits in Cybersecurity vary for many reasons growth, market leadership, scale, customer validation, technology and team Exits >10x are a small minority (18%) where the buyers are typically cash rich and willing to pay what it takes (median cash balance of the buyers at time of acquisition was $2.2B and median market cap was $17.9B) Buyers Source: Momentum Partners, 451 Research, Capital IQ. 4
The Security M&A Chessboard Major Moves Will Be Made Post Symantec / Blue Coat. The Top Targets (2016E Revenue $M) The Top Consolidators (Cash Balance $B) $105.3 $793.6 $63.5 $501.0 $425.3 $56.1 $336.8 $15.3 $303.6 $14.9 $211.0 $9.0 $197.8 $6.0 $2.8 All considered IPO candidates (> $75M in Revenue) $1.4 Each likely seeking $1B+ exit $1.1 Network/Endpoint Security MSSP Web Security Application Security IAM Vulnerability Management Cloud Security Application Security IAM Advanced Endpoint Security Backed by Vista Equity (Fund V: $5.7B) & Raytheon ($2.6B Cash) The Wild Cards Source: Momentum Partners. Advanced Endpoint Security The Wild Cards 5
CYBERscape: The Cybersecurity Landscape The Security Sector Is Dynamic And Vast. Infrastructure Security Endpoint Security Application Security Network Firewall Network Monitoring Endpoint Prevention WAF & Application Security Intrusion Prevention Systems Unified Threat Management Endpoint Detection & Response Vulnerability Assessment Messaging Security Web Security Managed Security Service Provider Industrial / IoT Security Security Operations & Incident Response Threat Intelligence Mobile Security Data Security SIEM Cloud Security Security Incident Response Specialized Threat Analysis & Protection Transaction Security Risk & Compliance Source: Momentum Partners. 6 Identity & Access Management
15 Advise. Network. Invest. Momentum Partners, LLC Momentum Capital Markets, LLC 340 Brannan Street Suite 501 San Francisco, California 94107 Michael Tedesco Executive Chairman michael@wellspring.partners Eric McAlpine Managing Partner eric@momentum.partners Petros Kitsos Senior Advisor petros@momentum.partners Timothy Lipton Partner tim@momentum.partners Keith Skirbe Director keith@momentum.partners Dino Boukouris Director dino@momentum.partners *Securities offered through Momentum Capital Markets, LLC, a division of Financial Telesis Inc. Member FINRA/SIPC.