October 23, 2013 CYBER-SECURITY TRANSACTIONS DRIVING DEAL VALUE IN THE INFRASTRUCTURE SOFTWARE SEGMENT

Berkery Noyes has released its Software report for third quarter 2013. According to the firm’s research, volume increased four percent over the prior quarter, from 386 to 401 deals. Aggregate transaction value rose 17 percent, from $26.2 billion to $30.6 billion.

Deal value in the Infrastructure Software segment throughout the first three quarters of 2013 was driven in part by the cyber-security subset. Along these lines, three of the top five transactions by value in the segment year-to-date were related to cyber-security. The largest Infrastructure Software deal in third quarter 2013 was Cisco Systems’ acquisition of SourceFire for $2.7 billion.

This was also the highest value transaction in the cyber-security subset since 2010, when Intel acquired McAfee for $7.5 billion. The SourceFire acquisition followed Vista Equity Partners’ acquisition of Websense for $942 million in second quarter 2013. One point to note is that the target companies in each of these instances received widely different valuations based on revenue. SourceFire had a revenue multiple of 10.9x, whereas Websense had a revenue multiple of 2.7x.

Other security focused transactions by notable acquirers in third quarter 2013 included IBM’s acquisition of Trusteer, an endpoint security software company that protects financial institutions against fraud and data breaches; and Welsh, Carson, Anderson & Stowe’s announced acquisition of Alert Logic, which delivers SaaS-based security solutions to cloud service providers and other enterprise customers.

“M&A activity in the information security market is showing signs of growth,” said James Berkery, Chief Information Officer at Berkery Noyes. “This is due in part to several factors, such as vulnerability from the adoption of cloud and mobile technologies. Moreover, the proliferation of bring your own device policies is creating another need for heightened levels of network security.” Berkery continued, “With some of the transactions we have seen this year, it is also becoming evident that acquirers are not shying away from high value deals in the sector.”