Q2 2013 IT Security Market Snapshot

Signal Hill Q2 2013 IT Security Market Snapshot

Don More

Managing Director [email protected]

Matt Fiore

Director [email protected]

www.signalhill.com

B a l t i m o r e │ B a n g a l o r e │ B o s t o n │ N a s h v i l l e │ N ew Y o r k │ R e s t o n │ S a n F r a n c i s c o

Eric Wagner

Managing Director [email protected]

Contents

2

Signal Hill at a Glance………………………………….………………………………………………..… 3

Signal Hill’s IT Security Practice M&A Overview………….………………..………………………….. 4

Q2 2013 IT Security M&A Overview…………………………..……………..……………..................... 5

Notable Q2 2013 IT Security M&A Transactions…………………………..……………..................... 6

All Q2 2013 IT Security M&A Transactions……………………...…………..……………..................... 7

Q2 2013 IT Security Public Company Valuation Metrics….…………………………………………. 9

LTM Relative IT Security Stock Price Performance…………….…………..………………………….. 10

Q2 2013 IT Security Financing Snapshot………………………..………….………………….……….. 11

Signal Hill at a Glance Signal Hill is a leading independent advisory boutique serving the M&A advisory and private capital raising needs of

growth companies. Signal Hill's experienced bankers provide deep domain expertise and an unyielding

commitment to clients in our sectors: Internet & Digital Media, Internet Infrastructure, Services and Software. With

over 500 completed transactions and offices in Baltimore, Bangalore, Boston, Nashville, New York, Reston and San

Francisco, Signal Hill leverages deep strategic industry and financial sponsor relationships to help our clients

achieve Greater Outcomes®.

Recent Mergers & Acquisitions, Strategic Advisory Transactions Mergers &

Acquisitions

Equity Private

Placements

Debt Advisory

Strategic

Advisory

Special

Committee

Advisory

Fairness

Opinions

3

Select Signal Hill IT Security Transactions

4

has been acquired by

The undersigned acted as financial advisor to e-DMZ

in connection with this transaction.

February 2011


The undersigned served as financial advisor to UTM

Vendor in connection with this transaction.

February 2011

UTM Vendor

Large Public Security Vendor


The undersigned acted as financial advisor to

Passlogix in connection with this transaction.

October 2010

has merged with

The undersigned rendered a fairness opinion to the

Board of AuthenTec in connection with this

transaction.

September 2010



ClearPoint Metrics PLC in connection with this

transaction.

January 2011


The undersigned served as financial advisor to Akonix


August 2008

has merged with

The undersigned served as financial advisor to

Marshal in connection with this transaction.

November 2008



SwapDrive in connection with this transaction.

June 2008

has acquired

The undersigned acted as co-manager to Perimeter

eSecurity in connection with this transaction.

January 2008



Securify in connection with this transaction.

September 2008


The undersigned acted as exclusive financial advisor

to Consul Risk Management in

connection with this transaction.

January 2007

received strategic investment from

The undersigned served as financial advisor to Intego


June 2007

has acquired


to SurfControl in connection with this

transaction.

July 2006



to Tenebril in connection with this transaction.

August 2006

has acquired


to Protiviti in connection with this transaction.

December 2006



Compliance 360 in connection with this

transaction.

January 2012

received an investment from

The undersigned initiated the transaction on behalf

of Solutionary.

November 2011


The undersigned acted as financial advisor to iJet

International in connection with this

transaction.

May 2011



Approva Corporation in connection with this

transaction.

September 2011



ChosenSecurity in connection with this

transaction.

February 2010



SafeNet Inc. in connection with this transaction.

February 2010

Embedded Security Solutions acquired the assets of

The undersigned served as financial advisor to Pareto

Logic in connection with this transaction.

March 2009



Orchestria in connection with this transaction.

January 2009


The undersigned served as financial advisor to Exploit

Prevention Labs in connection with this

transaction.

December 2007



Netcontinuum in connection with this

transaction.

July 2007

has merged with


Perimeter eSecurity in connection with this

transaction.

August 2007



SurfControl PLC in connection with this

transaction.

October 2007



to Aluria Software in connection with this

transaction.

August 2005

has acquired

February 2006


to Perimeter Internetworking in




to Pest Patrol in connection with this

transaction.

August 2004



to TruSecure in connection with this transaction.

February 2003

has acquired


to Perimeter Internetworking in


October 2003



to N2H2 in connection with this transaction.

October 2003

Includes Previous Experience

July 2009 May 2010

October 2012


has been acquired by has been acquired by

http://updataadvisors.com/transactions.asp?newsid=167






Q2 2013 IT Security M&A Overview The IT Security sector continued its upward trend in Q2 2013, resulting in a 67 percent increase in

the number of announced M&A transactions versus the prior quarter, and a doubling over the

prior-year quarter. Total announced Enterprise Value (EV) of companies acquired in Q2 2013

quintupled over Q1 2013 and tripled over the prior-year quarter – this can be attributed to two

major announced deals: Websense/Vista Equity Partners at $903M and Stonesoft/McAfee at

$389M. The quarterly EV/LTM Revenue median valuation multiple remained steady over the

prior quarter and well above last year – as important, we see continuing examples of high-

multiple deals as buyers pay for scarcity and performance leadership.

We are optimistic that volumes and valuations will continue showing robustness in second half

2013 as evidenced by the Aveska/EMC transaction that closed in early July 2013 and the just-

announced pending acquisition by Cisco of Sourcefire – both large, high-multiple transactions.

5

Source: Signal Hill Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

Number of Deals 18 33 40 21 35

% change from prior quarter - 83.3% 21.2% -47.5% 66.7%

Total Announced Enterprise Value ($M) $628.0 $2,957.8 $739.9 $335.0 $1,883.0

% change from prior quarter - 371.0% -75.0% -54.7% 462.1%

Median Announced Deal Size ($M) $130.0 $24.0 $40.0 $125.0 $30.0

% change from prior quarter - -81.5% 66.7% 212.5% -76.0%

Median EV/TTM Revenue Multiple 2.5x 3.8x 1.3x 3.3x 3.2x

% change from prior quarter - 34.2% -200.6% 153.8% -3.0%

Selected IT Security Transactions, Q2 2013 (1)

N-able Technologies

acquired by SolarWinds

EV: $120.0M

Revenue Multiple: 5.0x

N-able, a leading global prov ider of complete IT management and

Automation solutions for Managed Serv ice Prov iders (MSPs), has

been acquired by SolarWinds, a leading prov ider of powerful and

affordable IT management software. The acquisition will enhance

SolarWinds’ remote monitoring and management (RMM) offerings

and will add MSP serv ice automation to the range of its IT

management solutions.

Solera Networks

acquired by Blue Coat

Systems

EV: $225.0M


Solera Networks, the industry’s leading prov ider of big data security

intelligence and analytics for advanced threat protection, has been

acquired by Blue Coat Systems, the market leader in business

assurance technology. Solera’s real-time intelligence, security

visibility and forensic capabilities, combined with Blue Coat’s

comprehensive Web-based threat intelligence capabilities, will give

their clients the tools necessary to proactively block threats, respond

to and recover from data breaches and other incidents.

Solutionary acquired

by NTT

Solutionary, a leading pure-play enterprise Managed Security

Serv ices Prov ider, has announced it will be acquired by Nippon

Telegraph and Telephone Corp. (NTT), the world’s largest global IT

and telecommunications serv ices company. The acquisition will

enhance Solutionary’s continued global expansion, ongoing R&D

and worldwide security intelligence capabilities.

Stonesoft Oyj acquired

by McAfee

EV: $389.0M


Stonesoft, a publicly-traded company in Finland that delivers

software-based, dynamic, customer-driven cyber security solutions

that secure information flow and simplify security management, has

been acquired by McAfee. McAfee, a wholly owned subsidiary of

Intel Corporation, is a prov ider of broad security solutions and

serv ices for systems, networks and mobile dev ices around the world.

Websense acquired by

Vista Equity Partners

EV: $902.8M


Websense (NASDAQ: WBSN), a global leader in protecting

organizations from the latest cyber attacks and data theft, has been

acquired by Vista Equity Partners, a U.S.-based private equity firm

with $7B in capital committed to technology-based organizations.

Notable IT Security Transactions

(1) Includes deal metrics where publicly available 6

Q2 2013 IT Security M&A Transactions

7

Date Announced

Seller Buyer Enterprise

Revenues EBIT EBITDA Enterprise Value

Value Revenue EBIT EBITDA

25-Jun-13 Palisade Systems / Assets Absolute Software NA NA NA NA NA NA NA

20-Jun-13 Perlego Systems, Inc. Fixmo Inc. NA NA NA NA NA NA NA

20-Jun-13 ZeroVulnerabilityLabs, Inc. Malwarebytes Corporation

NA NA NA NA NA NA NA

19-Jun-13 Exacq Technologies, Inc. Tyco International Ltd. $150.0 NA NA NA NA NA NA

17-Jun-13 Solutionary, Inc. NTT Communications Corp.


14-Jun-13 NetResult Thomson Reuters Corporation


10-Jun-13 Fox Technologies Parallax Capital Partners, LLC


5-Jun-13 StillSecure / Managed Security Services division

SilverSky NA NA NA NA NA NA NA

5-Jun-13 MobileScope Evidon, Inc. NA NA NA NA NA NA NA

30-May-13 Vigilant LLC / Assets Deloitte LLP NA NA NA NA NA NA NA

30-May-13 RedCloud Security Inc Avigilon Corporation $17.0 NA NA NA NA NA NA

22-May-13 Solera Networks, Inc. Blue Coat Systems, Inc. $225.0 $12.0 NA NA 18.8x NA NA

21-May-13 N-able Technologies SolarWinds, Inc. $120.0 $24.0 $1.0 NA 5.0x 120.0x NA

21-May-13 PrivacyChoice AVG Technologies NA NA NA NA NA NA NA

20-May-13 Websense Inc. Vista Equity Partners $902.8 $359.4 $34.3 $54.4 2.5x 26.3x 16.6x

20-May-13 Cronto Ltd. VASCO Data Security International, Inc.

$21.9 NA NA NA NA NA NA

17-May-13 Third Defense Inc. Caliber Security Partners


15-May-13 SyncDog Inc IntegriCell Group NA NA NA NA NA NA NA

14-May-13 FuGen Solutions, Inc. 8K Miles $7.5 NA NA NA NA NA NA

14-May-13 Sense Security Tech / security & biometric assets

Homeland Security Corporation


14-May-13 Feedback Data plc Belgravium Technologies plc

$0.9 NA NA NA NA NA NA

Q2 2013 IT Security M&A Transactions

8

Date Announced

Seller Buyer Enterprise

Revenues EBIT EBITDA Enterprise Value

Value Revenue EBIT EBITDA

10-May-13 Earthwave Corporation Pty Limited Dimension Data Holdings plc


9-May-13 Netronome / SSL Inspector appliance product line

Blue Coat Systems, Inc. NA NA NA NA NA NA NA

8-May-13 FlexPoint Technology Haystax Technology NA NA NA NA NA NA NA

6-May-13 Stonesoft Oyj McAfee Inc $389.0 $52.7 ($1.5) ($0.6) 7.4x NA NA

1-May-13 myON-ID Media GmbH AVAST Software a.s. NA NA NA NA NA NA NA

29-Apr-13 Arkoon Network Security / 84% stake Cassidian CyberSecurity

$18.8 $17.2 NA $2.4 1.1x NA 7.7x

16-Apr-13 Digital Sandbox, Inc. Haystax Technology NA NA NA NA NA NA NA

15-Apr-13 ZeoBit LLC / MacKeeper and PCKeeper assets

Kromtech Alliance Corporation


9-Apr-13 Mail Distiller Proofpoint NA NA NA NA NA NA NA

9-Apr-13 Shavlik Technologies, LLC LANDesk Software $30.0 NA NA NA NA NA NA

4-Apr-13 Data Security Systems Solutions Pte Ltd.

Gemalto NV NA NA NA NA NA NA NA

3-Apr-13 RSA Security, Inc. / KBA technology LexisNexis Risk Solutions NA NA NA NA NA NA NA

3-Apr-13 Three Laws Mobility, Inc. BoxTone NA NA NA NA NA NA NA

IT Security Public Companies – Trading Statistics

9

% Dec./Inc. Fully Fully Enterprise Value / Revenues

Market Price from LTM Diluted Revenue Diluted Revenue EBITDA

Segment Company 6/30/2013 High Low Eq. Val. LTM CY '13E CY '14ENet Cash Ent. Val. LTM CY '13E CY '14E LTM CY '13E CY '14E

Security Bellwether

Content Symantec Corp. $22.48 (11.0%) 72.2% $15,660 $6,906 $6,909 $7,146 $1,656 $14,004 2.0x 2.0x 2.0x 7.4x 6.3x 5.3x

SVM Check Point Software Technologies Ltd.$49.68 (6.3%) 22.4% $9,759 $1,364 $1,398 $1,487 $1,385 $8,374 6.2x 6.0x 5.6x 10.9x 10.3x 9.6x

IAM Gemalto N.V. $90.43 (8.4%) 22.9% $7,603 $2,961 $3,195 $3,567 $439 $7,164 2.5x 2.2x 2.0x 16.1x 13.1x 11.0x

Content Trend Micro Inc. $31.74 (8.6%) 56.7% $4,186 $1,030 $1,077 $1,089 $1,201 $2,985 3.1x 2.8x 2.7x 8.8x 9.2x 9.1x

SVM Palo Alto Networks, Inc. $42.16 (41.9%) 7.9% $2,999 $359 $461 $622 $362 $2,637 7.3x 5.7x 4.2x NM NM 26.1x

SVM Fort inet Inc. $17.50 (38.0%) 6.3% $2,839 $552 $600 $686 $460 $2,379 4.3x 4.0x 3.5x 21.7x 17.8x 14.5x

SVM Sourcefire Inc. $55.55 (6.6%) 40.6% $1,727 $233 $278 $336 $206 $1,521 6.5x 5.5x 4.5x NM 27.8x 22.0x

Content AVG Technologies N.V. $19.45 (2.6%) 106.5% $1,051 $378 $419 $473 ($14) $1,066 2.8x 2.5x 2.3x 9.0x 7.8x 7.0x

SVM Imperva Inc. $45.04 (0.9%) 87.5% $1,104 $111 $136 $167 $111 $993 8.9x 7.3x 6.0x NM NM NM

Content Proofpoint, Inc. $24.25 (1.4%) 148.2% $826 $112 $129 $152 $87 $740 6.6x 5.7x 4.9x NM NM NM

SVM Qualys, Inc. $16.12 (1.6%) 58.8% $511 $95 $108 $125 $91 $420 4.4x 3.9x 3.4x 39.7x 25.0x 18.8x

Content Ahnlab Inc. $44.54 (63.3%) 57.2% $385 $119 NA NA $59 $325 2.8x NA NA 19.7x NA NASVM

Median 4.4x 4.0x 3.5x 13.5x 11.7x 11.0x

Mean 4.8x 4.3x 3.7x 16.7x 14.7x 13.7x

Security Small Cap

Content F-Secure Oyj $2.76 0.0% 51.4% $428 $201 $213 $228 $51 $378 1.8x 1.8x 1.7x 8.8x 8.0x 7.2x

Content Zix Corp. $4.23 (2.1%) 76.3% $262 $45 $49 $57 $24 $238 5.3x 4.8x 4.2x 23.8x 17.9x 13.6x

SVM Absolute Software Corp. $6.48 (8.9%) 95.1% $272 $81 $82 $95 $47 $225 2.9x 2.8x 2.4x 15.7x 16.3x 13.0x

IAM Vasco Data Security International Inc.$8.31 (20.2%) 27.6% $321 $157 $162 $173 $105 $217 1.4x 1.3x 1.2x 8.6x 8.4x 7.1x

Content CommTouch Software Ltd. $3.21 (19.5%) 62.1% $85 $26 $34 $42 $5 $80 3.1x 2.3x 1.9x NM 21.4x NA

Content Wave Systems Corp. Cl A $1.20 (75.0%) 0.0% $35 $28 $28 $31 $1 $34 1.2x 1.2x 1.1x NM NA NA

IAM Bio-key International Inc. $0.38 (7.8%) 656.0% $33 $3 NA NA ($0) $33 10.2x NA NA NM NA NA

SVM Intrusion Inc. $0.73 0.0% 809.7% $9 $7 NA NA ($4) $13 1.8x NA NA 28.5x NA NA

Content Edgewave Inc $0.25 (34.2%) 1150.0% $4 $17 NA NA ($7) $11 0.7x NA NA NM NA NA

Median 1.8x 2.0x 1.8x 15.7x 16.3x 10.1x

Mean 3.2x 2.4x 2.1x 17.1x 14.4x 10.2x

Content – antimalware, antivirus, email web filtering, data security and related threat protection segments. IAM – identity & access management solutions. SVM – Network Security & Vulnerability Management including IDS/P, firewalls, and vulnerability management

7/12 9/12 11/12 1/13 3/13 5/13 7/13-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

24.22%

31.74%31.13%

NASDAQ Composite Index

Signal Hill Bellwether Index

Signal Hill Small Cap Index

LTM Relative IT Security Stock Price Performance

10

LTM Relative Stock Price Performance

11

Select Q2 2013 IT Security Financing Activity

Company Investor(s) Deal

Value

Round

Number

Crocus Idinvest, Industrial Investors, Sofinnova, Others $45.0 D

Vaultize Tata Capital Innovations Fund - -

Vormetric Quicksilver Ventures, JK&B Capital, Sigma Partners, Split Rock Partners $15.0 -

Secualert Sequoia Capital, Norwest Venture Partners $10.0 -

Metacloud Canaan Partners, AME Cloud Ventures, Storm Ventures $10.0 A

Zetta.net Industry Ventures, Foundation Capital, Sigma $8.0 B

Disconnect FirstMark Capital $3.5 A

AlienVault Adara Venture Partners (Teldat Group and Neotec to invest soon) $4.0 1

FireHost The Stephens Group, LLC $12.0 D

Easy Solutions Medina Capital $11.0 B

AlephCloud Handbag, LLC $7.5 B

Carbon Black The Blackstone Group - -

IT-Ernity GMT Communications and Veronis Suhler Stevenson - -

AirWatch Accel Partners $25.0 2

PerspecSys Inc. Paladin Capital Group, Ascent Venture Partners and Intel Capital $12.0 B

Halon Security Almi Invest, Chalmers Innovation - 1

OpenDNS Sutter Hil l Ventures - B

Ionic Security Kleiner Perkins Caufield & Byers with TechOperators, Ken Levine and Dr. Paul Judge

$9.4 1

Nexgate Sierra Ventures $3.5 1

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Q2 2013 IT Security Market Snapshot

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