Cybersecurity M&A: Thoma Bravo to Acquire Proofpoint for $12.3 Billion

Significant merger and acquisition activity continues within the rapidly expanding cybersecurity sector. Private equity firm Thoma Bravo has announced its intention to purchase Proofpoint, a leading SaaS security provider, in a cash transaction valued at $12.3 billion.

Currently publicly traded on the Nasdaq, Proofpoint possessed a market capitalization of $7.5 billion as of Friday’s closing price. This acquisition offer, which will result in the company becoming private, represents a substantial premium over its recent share value. The deal has received the endorsement of Proofpoint’s board of directors.

Shareholder approval pending, the transaction is anticipated to be finalized during the third quarter of the current year.

Q1 Earnings Report

This announcement coincides with the release of Proofpoint’s first-quarter earnings report. The company reported revenues of $287.8 million, a 15% increase compared to the $249.8 million generated during the same quarter last year.

These revenues also surpassed analysts’ expectations, which averaged $281.6 million, as per data from Yahoo Finance.

Despite revenue growth, Proofpoint recorded a GAAP net loss of $45.3 million, translating to a loss of $0.79 per share. While this loss is narrower than the $66.8 million net loss reported a year prior, it remains a net loss.

The company stated its non-GAAP net income for the first quarter of 2021 was $31.5 million, or $0.49 per share.

Strategic Acquisitions and Market Dynamics

Proofpoint’s acquisition follows a series of acquisitions it has made over the years. These include Cloudmark, Weblife, OberserveIT, and Meta Networks, each representing investments in the hundreds of millions of dollars.

However, the company also faces increasing competition within the cybersecurity landscape, alongside a growing number of sophisticated cyber threats. These threats are amplified by the widespread adoption of cloud services, remote work arrangements, and the increasing volume of online transactions.

Proofpoint CEO Gary Steele stated that transitioning to a private structure will enable the company to operate with greater agility and flexibility. This will facilitate continued investment in innovation, strengthening its leadership position and proactively addressing evolving threat actors.

Core Business and Expanding Services

Proofpoint is widely recognized for its email-based security solutions, which remain a crucial component of its business. This is particularly relevant given that many security breaches originate from seemingly harmless emails containing malicious links or hidden threats.

Recognizing the broader threat landscape, Proofpoint has expanded its offerings to encompass security for other applications and cloud-based services.

Competitive Landscape and Market Growth

Key competitors include companies such as Symantec, Mimecast, Trend Micro, and Barracuda. Analysts predict that the security-as-a-service market will reach a value of $26 billion by 2025.

This represents an average annual growth rate of 19% between now and then.

Thoma Bravo has actively participated in this trend, establishing itself as a prominent acquirer of security businesses.

Thoma Bravo’s Portfolio and Past Transactions

Thoma Bravo’s previous acquisitions include Sophos for $3.9 billion, a majority stake in LogRhythm, and Imprivata for $544 million. Plans to exit the Imprivata investment for approximately $2 billion were shelved following the onset of the COVID-19 pandemic.

Alongside Silver Lake, Thoma Bravo previously took SolarWinds private in a $4.5 billion deal before relisting the company. The firm also faced scrutiny for selling shares in SolarWinds prior to the disclosure of a significant supply chain attack, which impacted nine federal agencies and numerous companies.

The attack was later attributed to Russia’s SVR foreign intelligence service. Thoma Bravo maintained that it was unaware of the breach at the time of the share sale.

Statements from Thoma Bravo

Seth Boro, a managing partner at Thoma Bravo, commented, “Proofpoint has achieved tremendous outcomes for customers around the world, and we’re excited to partner with this talented team at a moment when organizations need innovative solutions to navigate an increasingly treacherous cybersecurity environment.”

He added, “Proofpoint’s opportunity as a privately held company is incredibly compelling, and we look forward to working closely with them to drive continued business growth and deliver world-class advanced threat protection to even more customers in even more ways.”

Chip Virnig, a partner at Thoma Bravo, stated, “Proofpoint has established itself as a true powerhouse in the cybersecurity sector due to its innovative suite of market-leading products and impressive customer base of leading companies around the world.”

Virnig concluded, “As the sophistication of cyberattacks continues to increase, Proofpoint is delivering the most effective solutions to help organizations protect their data and people across digital platforms. We look forward to partnering with the talented Proofpoint team and leveraging Thoma Bravo’s significant security and operational expertise to help accelerate the Company’s growth.”