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Cybersecurity Market Shows Strength as Francisco Buys Forcepoint

Despite the pandemic, the cybersecurity market remains resilient, and defence contractor Raytheon has now agreed to sell Texas data protection specialist Forcepoint to private equity firm Francisco Partners.

The deal is thought to be driven by the need for cutbacks due to pandemic losses, and it is not surprising that Forcepoint should be discarded. Raytheon, which was formerly the world’s largest producer of guided missiles, is one of very few defense contractors to even attempt to expand into commercial cybersecurity.

Forcepoint, which develops software that protects critical data and networks for thousands of enterprises, has been under Raytheon for five years, and the sale is expected to fetch around $1.5 billion. This represents a $400 million discount from the $1.9 billion Raytheon paid to acquire Websense from Vista Equity Partners in 2015, before it merged the firm with its own cybersecurity unit to create Forcepoint, leaving Vista with a 19.7% stake.

Raytheon bought out Vista’s holding earlier this year, and an exit has been expected ever since, with cybersecurity firms like Forcepoint in hot demand from investors seeking strategic growth in a robust market.

“Security is an increasingly important strategic investment area for enterprises,” said Francisco Partners’ Brian Decker. “We have followed Forcepoint for years and have a deep appreciation for its outstanding portfolio of innovative security products.”

Interest in cybersecurity software has continued in 2020, coming after a mammoth 2019,  which saw several megadeals including Broadcom’s acquisition of Symantec’s enterprise security portfolio for $10.7 billion and Thoma Bravo’s take-private of Sophos Plc for $4 billion. 2020 has included Insight Partners’ acquisition of Veeam for $5 billion, Insight’s acquisition of Armis ($1.1bn) and a PE consortia, led by STG, acquiring RSA Security from Dell for $2.1bn.

Several notable smaller purchases include Palo Alto Networks’ acquisition of The Crypsis Group for $265 million, and Microsoft’s acquisition of CyberX, thought to be worth $165 million.

“Private equity continue to see significant value in cyber, driven by broadening growth across the space as enterprises demand more security throughout their technology estate, content and data. $24bn of mega-deals in 15 months and multiple mid-market transactions are testament to ongoing strong demand, which will continue.”

Richard Baker | Managing Partner

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