Cyber Security is Proving to be a Race Amongst the Bigwigs

Today, cybersecurity is an important issue for the c-suite. When breaches, such as Yahoo!’s, are
decreasing valuations by millions of dollars, everyone is paying attention and looking to expand their
own security. A recent study from the Ponemon Institute found that the average cost for a data breach
to large corporations is $3.8 million and is only going to increase as more information is stored on
vulnerable cloud software. Given this phenomenon, there have been five $1B+ deals, including
acquisitions by Intel, Cisco, and Symantec.

Given the recent large-scale data breaches and their associated consequences, both in the private sector
and government, the cybersecurity spree will not be showing signs of abating for the foreseeable future.
Four out of the six biggest cybersecurity deals between 2012 and 2016 occurred in the second half of
2016. Given the mass migration of services to the cloud, there has been an estimated 400 million
malware attacks according to IDC. At Pharus, we noticed several deals in the space proving companies
are in a race to become the authority in the cybersecurity market.

The most notable transaction occurred on February 8, when Sophos Group entered into an agreement
to acquire Invincea Inc., a top performing next-gen antivirus security company. The transaction values
Invincea at $120M and 12.24x Revenue. The acquisition will enable Sophos to expand on their next-
generation endpoint market software, Intercept X, technology which was originally acquired from
Surfright in 2015.

On February 28, Palo Alto Networks, Inc. (NYSE:PANW), acquired LightCyber, a leading provider of
Behavioral Attack Detection solutions based in Israel. The acquisition, an all cash deal, is valued at
$105M and 10.5x Revenue. The acquisition will enhance Palo Alto Networks threat prevention
capabilities, enabling customer organizations to prevent cybersecurity breaches before they occur.
On February 1, Aruba, an HP company, announced it acquired Niara Inc., a California-based leader in the
User and Entity Behavior Analytics (UEBA) security market segment. While official terms of the
transaction were not disclosed, the transaction size is believed to be approximately $40M. The acquired
technology will enhance Aruba’s ClearPass network security portfolio to become an industry leader in
the attack detection solution space.