Company to go private as it transitions to an SaaS model
Network security vendor Forescout, which went public in 2017 and is among many tech vendors shifting to a Software-as-a-Service (SaaS) model, will once again become a private company after it’s bought by private equity firms Advent International and Crosspoint Capital for $1.9 billion.
The Lowdown: The announcement of the deal this week came the same day the San Jose, California-based company announced quarterly earnings that showed revenue of $91.3 million, an 8% jump over the previous year but below what had been projected.
The Details: The two private equity firms will pay $33 in the all-cash transaction, a 17.9% premium over Forescout’s closing price of $27.98 Feb. 5, the day before the deal was announced. Terms of the deal – which is expected to close in the second quarter – include a 30-day “go shop” period during which Forescout officials can accept bids from other potential buyers. That period closes March 8.
In a blog post, Forescout President and CEO Michael DeCesare said being bought by Advent and Crosspoint and going private will enable the company to innovate more quickly on its product portfolio, which includes a platform for enabling enterprises to rapidly see and control what’s on their corporate networks. It’s an important capability given the increasingly distributed IT environment, where applications and data are accessed and stored outside of traditional data centers, and where the Internet of Things (IoT) and the changing nature of operational technology (OT) mean more devices are connecting to the network.
DeCesare said the acquisition will benefit all stakeholders of the 20-year-old Forescout:
> Customers will see faster innovation – including around cloud-based and SaaS products – due to the infusion of money and other resources.
> Technology partners also will benefit from Forescout’s accelerated innovation and collaboration.
> Employees will see new career development opportunities as the company grows.
> Shareholders will receive a premium paid for their investments.
Background: IoT offers enterprises a broad array of opportunities in a world that’s becoming more mobile and decentralized. At the same time, it’s also increasing the attack surface available to bad actors and driving the introduction of more security regulations, which are fueling a rapid expansion of the global IoT security market. A report from MarketsandMarkets said the IoT security space will grow 33.7% a year, from $8.2 billion in 2018 to $35.2 billion by 2023.
The Buzz: “Forescout has established itself as a leader in device visibility and control, with the most advanced platform in the market,” DeCesare said. “We are still in early innings of a large market opportunity as every organization needs visibility into what is connecting to their network and how to mitigate against high risk devices, including non-traditional IoT and OT devices. This transaction represents an exciting new phase in the evolution of Forescout. We are excited to be partnering with Advent International and Crosspoint Capital, premier firms with security DNA and track records of success in strengthening companies and supporting them through transitionary times.”
“We are pleased to have reached this agreement with Advent, which delivers significant immediate value to shareholders and positions Forescout to continue meeting and exceeding the expectations of our customers,” said Theresia Gouw, chair of the Forescout board. “This transaction, which is the result of a robust process conducted by the board of directors with the assistance of independent legal and financial advisors, is a testament to the value Forescout has created and the reputation our team has built. In making its determination, the board of directors considered the likely volatility associated with the business model transition to ratable revenue recognition, changes to our go-to-market initiatives, particularly in EMEA, and timing of significant eight-figure deals, while managing to quarterly street estimates as a publicly traded company.”
“Forescout is an ideal partner for Advent, as it’s a mission-critical business positioned to capitalize on key tech megatrends,” said Bryan Taylor, head of Advent’s technology investment team and a managing partner. “The company has differentiated itself from its core competitors with its proprietary, agentless technology, making it ideal for large, complex organizations in a rapidly evolving cyber-risk landscape.”
“As enterprises continue to shift to the cloud and decentralized networks, today’s chief information security officers [CISOs] are looking for secure solutions to increase visibility and provide orchestration, making their network controls more seamless,” said Greg Clark, managing partner at Crosspoint Capital. “Forescout’s platform is already ahead of the curve, and we believe we can further advance the company’s market position by applying the collective experience and expertise in cybersecurity software of the Advent and Crosspoint Capital team.”