UPDATED 13:28 EDT / NOVEMBER 27 2017


Cybersecurity consolidation: Barracuda to go private in $1.6B buyout as McAfee buys Skyhigh

In the latest of a long string of recent acquisitions in the cybersecurity market, Barracuda Networks Inc. is set to go private in a $1.6 billion buyout.

The company announced today that its board has accepted the offer from private equity firm Thoma Bravo LLC. The sum breaks down to $27.55 per share, a respectable 16 percent premium over its Friday closing price. The company provides network security products such as firewalls, as well as email filtering software for blocking malicious messages and a number of other tools.

Barracuda started trading on New York Stock Exchange in 2013 for $18 per share and peaked at just over $46 apiece two years later. One of the reasons that the company’s stock has dropped so significantly since is Wall Street’s skepticism over its ability to move from selling on-premises software to cloud services.

“We believe the Thoma Bravo acquisition is probably the best scenario for shareholders, given skepticism regarding the company’s ability to transition the business from on-premises appliances to cloud-based solutions and recent margin challenges,” analysts from William Blair & Co. wrote in a note to clients today. “While the frequency of ransomware attacks has been creating demand tailwinds for both Barracuda’s email security and backup products, we believe the company also faced some challenges from the transition to cloud and feel this takeout price is fair.”

The company seems to be doing OK from a financial standpoint, however. Barracuda saw sales rise 7 percent from a year ago, to $94.3 million in the last quarter, thanks to strong customer demand. Revenue from its core offerings rose 22 percent during the period ended Aug. 31, capping off a full year of double-digit growth on this front.

Thoma Bravo apparently believes that the company can maintain this momentum as it shifts to a cloud-based business model. The firm expects to wrap up the acquisition by March 2018.

As it happens, the announcement of the deal today coincided with another major buyout in the cybersecurity segment. McAfee Inc., which spun off from Intel Corp. eight months ago, has inked an agreement to buy a startup called Skyhigh Networks Inc.  that helps companies protect the data they store in the cloud. One source said it was an all-cash deal.

Skyhigh reportedly received a valuation of $400 million after its last funding round. This would suggest McAfee’s bid must’ve been quite sizable, especially given how high cybersecurity currently ranks on enterprises’ agenda. Recent attacks such as the infamous breach at Equifax Inc. have made the importance of network protection all too clear in the corporate world.

These are just the latest examples of cybersecurity mergers and acquisitions, which are happening even as more startups flock to the segment. In September, identity and access management provider SecureAuth Corp. announced plans to merge with cybersecurity firm Core Security SDI Corp. Earlier the same month, Juniper Networks Inc. bought Cyphort Inc., a Santa Clara, California-based cybersecurity startup. And in July, Cisco Systems Inc. scooped up cloud security startup Observable Networks.

The increased focus on cybersecurity is also fueling deal activity in adjacent segments. A startup called At-Bay Inc., for instance, recently exited stealth after closing a $5 million investment to provide so-called cyberinsurance designed to mitigate the financial impact of data breaches.

Image: Barracuda

Since you’re here …

Show your support for our mission with our one-click subscription to our YouTube channel (below). The more subscribers we have, the more YouTube will suggest relevant enterprise and emerging technology content to you. Thanks!

Support our mission:    >>>>>>  SUBSCRIBE NOW >>>>>>  to our YouTube channel.

… We’d also like to tell you about our mission and how you can help us fulfill it. SiliconANGLE Media Inc.’s business model is based on the intrinsic value of the content, not advertising. Unlike many online publications, we don’t have a paywall or run banner advertising, because we want to keep our journalism open, without influence or the need to chase traffic.The journalism, reporting and commentary on SiliconANGLE — along with live, unscripted video from our Silicon Valley studio and globe-trotting video teams at theCUBE — take a lot of hard work, time and money. Keeping the quality high requires the support of sponsors who are aligned with our vision of ad-free journalism content.

If you like the reporting, video interviews and other ad-free content here, please take a moment to check out a sample of the video content supported by our sponsors, tweet your support, and keep coming back to SiliconANGLE.