Cybersecurity software maker Forescout Technologies Inc. today said that its board has approved a deal to be acquired for $1.9 billion by Advent International and Crosspoint Capital Partners.

The two private equity firms’ offer amounts to $33 per Forescout share. It’s a respectable premium over the stock’s Wednesday closing price of $27.98, but that figure doesn’t tell the whole story behind the acquisition. Getting the full picture requires going back a few months earlier, to Oct. 10.

That’s the day Forescout told shareholders it was expecting third-quarter revenues of $90.6 million to $91.6 million, well below the $98.8 million to $101.8 million originally anticipated. The company’s stock subsequently tanked from $39.20 per share the day before to $24.57. Yet another twist came a week later when Forescout disclosed that it had been approached by a pair of investment firms, Corvex Management and Jericho Capital Asset Management, about an acquisition.

Advent’s and Crosspoint’s $1.9 billion bid was evidently more attractive, but Forescout is still leaving the door open to a potentially even bigger offer. Its agreement with the private equity firms provides for a 30-day “go shop” period in which Forescout can solicit alternative proposals from third parties.

San Jose, California-based Forescout makes software that enables enterprises to scan their networks for insecure devices. Over the years, the company has built out several value-added tools on top of its core network mapping engine that provide features such the ability to automatically quarantine infected systems.

Under the new ownership, Forescout will have the “flexibility to continue investing in the development and deployment of leading-edge cybersecurity products and solutions,” it  said in a statement.

Forescout Chief Executive Officer Michael DeCesare provided more insight into the company’s development roadmap and the thinking behind it during an appearance on SiliconANGLE’s theCUBE studio last year. “Companies have to be careful they don’t increase their product size too quickly before they have financial means to do so,” DeCesare told host Jeff Frick.

Having access to the financial resources of Advent, which bills itself as one of the world’s largest private equity firms, could certainly give Forescout a boost in the engineering department. “We just see such a large market in helping answer that question — ‘What is on my network?’ — that’s our focus, and we want to do it across the extended enterprise at scale,” DeCesare said last year. 

The CEO is set to remain at the helm after the deal completes. Advent and Crosspoint expect to wrap up the deal in the second quarter pending the usual closing conditions.

Private equity is playing an increasingly big role in security mergers and acquisitions. Last month, Insight Partners picked up Armis Inc. for $1.1 billion and shelled out $5 billion to acquire Veeam Software Inc., a data protection provider whose software is among others used to mitigate the risk posed by ransomware attacks. Earlier, October Thoma Bravo took Sophos Group plc private in a deal that valued the British endpoint protection giant at $3.9 billion.

Other players are looking to new ways to roll up the hundreds of cybersecurity firms that keep sprouting up as enterprises scramble to find new ways to protect their employees, customers and data. SCVX Corp. went public Jan. 24 as a so-called Special Purpose Acquisition Company that sells stock to the public with the intention of using the proceeds to buy other companies. The firm, which raised $200 million in the initial public offering, is focused on buying cybersecurity firms with valuations between $600 million and $1.5 billion.

All this activity is likely to boost venture capitalists’ already strong appetite for cybersecurity investments. Funding for security startups broke another record last year and 2020 is off to a strong start as well: Just this morning, against the backdrop of Forescout’s acquisition announcement, cloud security provider Netskope Inc. announced that it has landed a $340 million round at a nearly $3 billion valuation. 

Photo: ForeScout