Bach Seat

While the massive Equifax data breach is still fresh in everyone’s minds and the cybersecurity workforce is expected to be short nearly 2 million people. IT security expenditures to top $1 Trillion by 2022. Private equity giant Thoma Bravo, LLC has jumped back into the IT security market with both feet. Barracuda Networks has been bought by the private equity firm in a deal that’s valued at $1.6 billion.

Barracuda (CUDA) sells appliance and cloud-based cybersecurity and data protection services. Clients include; Boeing, Microsoft and the U.S. Department of Defense. Barracuda says it has over 150,000 customers. Upon the close of the transaction, Barracuda will operate as a privately held company.

Barracuda Networks has been bought

Barracuda Network was founded in Ann Arbor, Michigan in 2003. From Ann Arbor, it raised at least $46 million in venture funding prior to its IPO. CUDA went public on the New York Stock Exchange in November 2013, pricing its IPO at $18. Barracuda acquired Yosemite Technologies in 2009 to expand its offerings into the storage market.

Barracuda continued to innovate in the run-up to its acquisition. eWeek reports that in March 2017, Barracuda debuted new data backup and recovery capabilities for VMware and Microsoft virtual machines. In June 2017 Barracuda announced its new Sentinel service. The service uses artificial intelligence (AI) and container-based technologies to improve email security.

Barracuda also enhanced its network security products and services in 2017. eWeek reported in November that the company expanded the cloud capabilities for its Web Application Firewall (WAF) and NexGen Firewall products. The new capabilities include usage-based billing for the NextGen firewall running in the Amazon Web Services (AWS) cloud. The firewall included automated configuration capabilities for the WAF, thanks to an integration with the Puppet DevOps tool.

CEO BJ Jenkins commented on the transaction, “We will continue Barracuda’s tradition of delivering easy-to-use, full-featured solutions that can be deployed in the way that makes sense for our customers.”

Thoma Bravo

Thoma Bravo is a Chicago-based private equity firm with $17 billion under management. Their appetite for IT firms is rather broad. Some of it’s most notable purchases have been:

• September 2014 – $2.4 billion purchase of Detroit-based Compuware.
• December 2014 – $3.6 billion acquisition of Riverbed.
• In October 2015, they teamed up with Silver Lake to buy IT infrastructure management vendor SolarWinds for $4.5 billion.
• April 2017 – Purchased a minority stake in the freshly re-spun McAfee.
• June 2017 they purchased Remote Monitoring and Management (RMM), IT security management vendor Continuum.

Their portfolio has included brands such as; Bomgar, Digicert, Digital Insight, Dynatrace, Hyland Software, Imprivata, iPipeline, Nintex, PlanView, Qlik, SailPoint, and SonicWall.

Thoma Bravo has resold many of its holdings in recent years.

• March 2012, they sold SonicWall to Dell for an estimated $1.5 Billion.
• March 2015, they sold network security vendor Blue Coat Systems to Bain Capital for $2.4 billion.
• September 2015, sold its interest in infrastructure-focused solution provider Sirius Computer Solutions to Kelso & Co..
• January 2017, They also sold endpoint security vendor LANdesk Software to Clearlake Capital.
• November 2017, identity and access management vendor SailPoint Technologies went public with an IPO, however, the private equity firm is maintaining a controlling stake in the company.

TechCrunch notes that private equity firms began more aggressively buying up software companies last year. The thinking seems to be they can generate reliable returns from such investments. The biggest take-private deals lately include:

• Marketo, a marketing software maker. Went public in 2013 and was taken private again by Vista Equity Partners in 2017 for $1.79 billion in cash;
• The sale of event-management company Cvent last year to Vista Equity Partners in a $1.65 billion deal.
• Cybersecurity risk-monitoring platform SecurityScorecard raised $27.5 million from the VC arms of Google, Nokia, and Intel.

Other notable IT security equity funding recipients include; Attivo Networks, Darktrace, and SentinelOne.

Investopedia speculates that Thoma Bravo is paying a pretty high premium for Barracuda. CUDA now trades at 139 times earnings and 4 times sales. But under private management, its products will likely be integrated with the firm’s other software products to generate synergies.

CRN notes that being a privately owned company will give Barracuda a stronger ability to chart its own destiny. They will not have to “tap-dance to the Wall Street music,” Michael Knight, president and chief technology officer at solution provider Encore Technology Group, Greenville, S.C., said. He hopes Thoma Bravo’s infusion of capital will enable Barracuda to continue driving its public cloud business, a more solidified SD-WAN toolset, and more integrated endpoint security protection.

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I have used Barracuda products at past jobs. Including their SPAM-Email firewall appliances and their cloud-based backup up system. The pricing was adequate. Renewals were easy. The email firewalls were really robust and almost set and forget.

The few times when I needed tech support, it was available in Ann Arbor, Michigan. Barracuda, founded in Ann Arbor, was one of the early believers in the area as a high-tech hub. Barracuda has plans to spend  $2.3 million on the expansion of its operations center in the former Borders Books offices at 317 Maynard Street. The expansion will add 115 new jobs in downtown Ann Arbor over the next four years. I hope that after Barracuda Networks has been bought by Thoma Bravo, the deal does not have a “Chainsaw Al” that will kill that growth.

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Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.