Private equity firm Permira is buying Nasdaq-traded cybersecurity company Mimecast Ltd. in an acquisition worth approximately $5.8 billion.

The transaction was announced this morning but was reported some time ago: Word first emerged that Mimecast was exploring a sale in late October. Permira’s $5.8 billion offer, which amounts to $80 per Mimecast share, represents a 16% premium to the last closing price of the company’s stock before its plans for an acquisition became public. 

Founded in 2003, Mimecast provides a popular cybersecurity platform that enterprises use to protect employees from malicious emails. The platform blocks spam and spear-phishing messages, the latter being attempts to trick people into thinking they’re getting contacted by an acquaintance. It also detects malicious attachments, including malware that uses so-called zero-day software vulnerabilities not known to cybersecurity researchers.

Mimecast uses a variety of methods to catch malicious emails. The company analyzes security data about the billions of emails it scans for customers every month to identify cyberattack patterns, then uses this information to develop mitigations. To detect malware, Mimecast’s platform analyzes the code of attachments using static file analysis methods and opens them in an isolated sandbox. For added measure, the platform compares files against a database of known malware strands.

Mimecast has built on its strong presence in the email security segment to expand into several adjacent areas. 

Mimecast sells a tool called Safe Phish for training employees on cybersecurity best practices. It allows a company’s information technology department to test employees’ cybersecurity know-how by sending them harmless versions of spear-phishing emails used in real hacking campaigns. In the backup market, another area where Mimecast competes, it provides a product that enables enterprises to archive business emails and restore them if the original copies become unavailable.

Permira is acquiring a company with steady revenue growth and a large addressable market. Mimecast has achieved year-over-year annual sales growth of 17% or more in each of the past four quarters. During the company’ most recent quarter, it exceeded the high end of its guidance on all metrics with adjusted earnings of 40 cents a share on $147.2 million in sales, up 20% from the same time a year ago.

The broader cybersecurity software market in which Mimecast competes is growing as well.

To support revenue growth, Mimecast this year expanded its efforts to win large enterprise customers. The company’s most recent quarterly results provided new details about its momentum in the enterprise market. During the three months ended Sept. 30, Mimecast generated about 20% of its recurring revenue from customers with more than 5,000 users. Compared with a year ago, the average value of orders the email security provider received during the quarter increased 15%.

“Permira has a strong track record of collaboratively supporting companies’ growth ambitions and strategic goals, and we look forward to working together to further strengthen the cybersecurity and resilience of organizations around the world,” Mimecast Chief Executive Officer Peter Bauer said in a statement. “This is a great outcome for our company and our shareholders.”

The purchase of Mimecast is the second major cybersecurity acquisition inked by Permira to be announced in the past few weeks. Last month, an investor group that included Permira agreed to acquire cybersecurity giant McAfee Corp. for more than $14 billion.

The terms of the Mimecast acquisition include a 30-day “go-shop” period expiring on Jan. 6, 2022 during which the company can seek out other acquisition bids. Unless another bidder submits a higher offer, Permira is on track to complete the acquisition in the second half of next year.

Permira has made a number of high-profile investments in the enterprise software market over the years. In 2012, it teamed up with another investment firm to acquire Genesys Cloud Services Inc. for $1.5 billion. Genesys, which makes software that helps companies manage customer interactions, received a $21 billion valuation in a funding round announced on Monday. 

In the email security segment, two of Mimecast’s biggest competitors were also acquired this year. In April, Thoma Bravo inked a $12.6 billion deal to buy Proofpoint Inc., which provides an artificial intelligence-powered cybersecurity platform that helps companies block malicious emails. Zix Corp., another major provider of email security software, agreed to be acquired by OpenText Corp. in November for $860 million.

That two of the three major acquisitions announced in the email security segment recently were made by private equity firms reflects a broader market trend. Private equity firms have invested more than $16 billion into the enterprise software market between January and August, according to PitchBook Data Inc. research. The increased investment activity is believed to be the result of several factors, including the fact that software companies are increasingly opting to sell their products on a subscription basis, which allows them to realize recurring revenue streams favored by investors. 

Image: Mimecast