it security sector - william blair · 2015. 5. 6. · from 2010-2014, the investment ... intent, as...

Q2 2015 UpdateMay 2015

IT Security Sector Overview of Market Activity in the IT Security Sector

William Blair’s investment banking group combines signi�icant transaction experience, rich industry knowledge, and deep relationships to deliver successful advisory and �inancing solutions to our global base of corporate clients. We serve both publicly traded and privately held companies, executing mergers and acquisitions, growth �inancing, �inancial restructuring, and general advisory projects. This comprehensive suite of services allows us to be a long-term partner to our clients as they grow and evolve. From 2010-2014, the investment banking group completed more than 330 merger-and-acquisition transactions worth $73 billion in value, involving parties in 36 countries and �ive continents, was an underwriter on more than 20% of all U.S. initial public offerings, and raised nearly $100 billion in public and private �inancing.

About William Blair Investment Banking

William Blair & Company

IT Security Sector – Q2 2015 Update IT Security Market Update 1

IT Security Market Update

IT Security Exit Landscape Is Robust

Continued interest in IT security from a wide range of sectors has created a dynamic and widespread M&A environment, while the IPO remains a strategic option as public market investors remain receptive to IT security firms

The momentous development of the IT security space has continued into 2015 as investors continue to pour funds into IT security companies and attackers continue to both validate the industry and generate further demand for increasingly sophisticated IT security solutions. M&A activity in the space has been robust of late, with Raytheon’s acquisition of Websense for $2.3 billion and Bain Capital’s acquisition of Blue Coat for $2.4 billion headlining activity year to date. Similarly, the equity markets, both public and private alike, remain receptive, with CyberArk successfully completing a follow-on offering and more than $1 billion being raised by IT security start-ups in the first quarter.

The cost of breaches continues to rise, broadening the demand for security vendors. In its most recent annual filing, Target (NYSE: TGT) disclosed that it had incurred over $250 million in cumulative damages relating to its 2013 data breach. Outside the initial impact, data breaches clearly can have long-lasting and far-reaching implications. Furthermore, indicative of the broadening liabilities associated with IT security, the adoption rate for cyber-insurance has more than doubled to 26% in the past year, according to a Ponemon Institute study. Protection aside, internal threats continue to loom large as nearly 60% of security incidents are caused from inside a company by human errors and employees with malicious intent, as demonstrated by a Morgan Stanley employee’s theft of the personal data of 350,000 clients toward the end of 2014.

Exit Landscape Dynamics Continuing the discussion from the first quarter 2015 update regarding private capital surges in IT security, the IT security investment market continues to evolve. With the presence of strategic participants at all stages of the investment life cycle, both the fundraising and exit landscapes are seeing a tremendous amount of activity.

Between M&A and public equity, both avenues create attractive exit opportunities for shareholders. As the consolidation trend across the IT security space continues to progress, strategic and financial buyers alike have been very active in taking majority ownership positions in IT security companies. Of particular note is the wide-ranging sector interest, as highlighted in the charts to right. While sponsor interest in the space is significant, strategic consolidation across sectors is a dominant force in the exit landscape, with strategic buyers maintaining the acquirer’s seat in approximately 72% of M&A transactions in the space. Most notably, investors that are looking to exit their IT security investments will likely be seeking strategic interest as a greater relative price is being paid by these parties, as evidenced by a median enterprise value to revenue multiple of 4.5x for strategic buyers compared with 3.0x for financial buyers since 2012, a 50% premium.

The threat landscape continues to create demand across the IT security space:

387 new threats every minute

26% of network attacks

originating in the browser

89% of IT security budgets are rising or holding steady

54% are looking to replace or augment their

current endpoint protection infrastructure

Sources: McAfee and CyberEdge

IT Security M&A Transactions by Buyer Type

72%

28%Strategic Buyer4.5x Median EV / LTMRevenueFinancial Buyer3.0x Median EV / LTMRevenue

Representative Transactions by Buyer SectorTarget Buyer Buyer SectorTrustwave Singtel TelecomBlue Coat Bain Capital Private EquitySilverSky BAE Systems DefenseBlackbird Raytheon DefenseTripwire Belden Diversified TechnologySafeNet Gemalto Financial TechnologyCyvera Palo Alto Networks Next-Gen ConsolidatorsPasswordBox Intel Traditional Consolidators

Source: William Blair and PitchBook


IT Security Sector – Q2 2015 Update 2 IT Security Market Update

First quarter 2015 brought about a relative slowdown in IPO activity, seeing the fewest IPOs come through the market on a quarterly basis since first quarter 2013 and a greater than 60% drop from first quarter 2014. The most recent IPO for an IT security company was that of CyberArk, which occurred late in September 2014. However, initial momentum in second quarter 2015 indicates that the IPO market is picking up, with 12 IPOs priced in April. Therefore, the IPO window will likely remain open as long as the public equity markets continue to thrive. In the last six months as of May 1, an equally weighted index of the IT security companies that executed an IPO in 2014 (CyberArk, Imprivata, MobileIron, Cheetah Mobile, and Varonis) has grown 23.9%, which is highly significant compared with the still-strong performance of the S&P 500 of 4.5% over the same period. Needless to say, with public equity performance of that caliber in the IT security space and broader market, the IPO remains a very relevant exit strategy. We expect to see the IPOs of several high-profile IT security companies in the second half of 2015.

William Blair IT Security Team

Dan Daul, managing director and co-head of IT security, joined the investment banking group of William Blair in 2005. While at William Blair and in his prior position at Robert W. Baird & Company, Dan focused on the investment banking needs of IT security, financial technology, and transaction-processing companies. Dan has been involved in more than 60 financing and M&A transactions aggregating more than $5.0 billion in transaction value. Dan received his bachelor’s degree from the University of Wisconsin and his M.B.A. from the Kellogg School of Management at Northwestern University.

[email protected] +1 312 364 8457

Scott Stevens, managing director and co-head of IT security, joined the investment banking group of William Blair in 2007. Before joining the firm, Scott spent 11 years in several roles with EMC Corporation, including mergers and acquisitions, venture investments, office of the CTO, sales and marketing, and technology alliances. He has a broad background in infrastructure software, systems, and services. Scott graduated from Illinois Wesleyan and received his M.B.A. from the Kellogg School of Management at Northwestern University.


Drew Thomas, director in the technology group, joined the investment banking group of William Blair in 2010. Before joining the firm, Drew worked in corporate strategy for Cerner Corporation, a healthcare information technology (HCIT) company. In addition, Drew was an associate with Stone Arch Capital, a middle-market private-equity firm, where he specialized in deal evaluation and execution. Before Stone Arch Capital, Drew was an analyst in the investment banking group of RBC Capital Markets, focusing on technology M&A. Drew holds an M.B.A. from Harvard Business School and a B.B.A. in finance and economics from the Tippie College of Business at the University of Iowa. Drew is a CFA charterholder.


IPOs Priced by Quarter

Source: Dealogic

0

10

20

30

40

50

60

70

mailto:[email protected]




IT Security Sector – Q2 2015 Update William Blair Spotlight – Recent IT Security and Compliance Transactions 3

William Blair Spotlight – Recent IT Security and Compliance Transactions

• CyberArk is a leading provider of enterprise security software that protects against threats inside enterprise networks.

• William Blair acted as a co-manager for the offering.

• CyberArk is a leading provider of enterprise security software that protects against threats inside enterprise networks.


• Retail Decisions (ReD) is a world leader in fraud prevention with solutions present at every stage of the payments value chain. Supporting merchants and PSPs, issuers and acquirers, and processors and switch networks in the fight against fraud, ReD serves customers from multiple sectors and across six continents worldwide.

• ACI Worldwide, the universal payments company, powers electronic payments and banking for more than 5,000 clients around the world.

• William Blair represented ReD in connection with its sale to ACI Worldwide.

• Convey Compliance Systems is a leading SaaS-based provider of innovative on-demand tax information reporting and withholding solutions focused on nonwage and investment income.

• Taxware, a portfolio company of Vista Equity Partners, is the leading provider of sales, use, and value-added tax determination software.

• William Blair represented Convey in connection with its sale to Taxware.

• Imprivata is a leading provider of authentication and access management solutions for the healthcare industry.


• Cyren is a provider of next-generation cloud-based security technology and services, working with 200-plus global partners and leveraging traffic data from numerous notable security providers.

• Offering proceeds will be used to invest in research and development, sales and marketing, and other corporate purposes as the company aims to take advantage of significant opportunities in Web security and cybersecurity platforms.

• William Blair acted as the exclusive placement agent for the offering.

$234,600,000

Follow-on Offering

March 2015

$98,624,000

Initial Public Offering

September 2014

Not Disclosed

has been acquired by

August 2014

Not Disclosed

has merged with

July 2014

$86,250,000


June 2014

$11,500,028

Registered Direct Offering

July 2014


IT Security Sector – Q2 2015 Update 4 2015 William Blair Industry Events Schedule and 2014 Recap

2015 William Blair Industry Events Schedule and 2014 Recap

18th Annual Private Equity Conference • 55 companies participated in 2014 • More than 640 institutional private-

equity investors and venture capital investors attended

• Roundtable discussions focused on the following industry sectors and topics: – Technology – Financial services – Business services – Commercial services – Consumer and retail – Healthcare – Industrials

• To be held September 16-17, 2015, at the Four Seasons in Chicago

35th Annual Growth Stock Conference • 219 companies participated in 2014 • High-level speaker percentage

(defined as CEO, chairman, COO, or president) was 70% – More than 960 institutional

clients attended – More than 4,100 one-on-one

meetings took place

• To be held June 9-11, 2015, at the Four Seasons in Chicago

3rd Annual Technology Company Growth Conference • 68 leading late-stage private

technology companies presented in 2014

• Business development and financial sponsor attendees: – Public companies with

roughly $1 billion market capitalization

– Large private companies with more than $500 million in revenues

• Operating (or seeking acquisitions) in technology, financial technology, and/or healthcare IT

• To be held May 14, 2015, at the Palace Hotel in San Francisco


IT Security Sector – Q2 2015 Update Relevant William Blair IT Security and Compliance Expertise 5

Relevant William Blair IT Security and Compliance Expertise

IT Security and Compliance Transactions

IT Security Research Coverage

Jonathan Ho joined William Blair in 2005 and specializes in cybersecurity and security technology. Jonathan received his bachelor’s degree from the University of Maryland and his master’s degree from Johns Hopkins. In addition, he received his M.B.A. from the University of Chicago.

(1) Indicates covered until acquired (2) Covered by Bhavan Suri (3) Covered by Jason Ader

$333,224,000

Initial Public & Follow-on Offering

Mar ’15 & Sept ‘14

Not Disclosed


August 2014

$11,500,028

Registered Direct Offering

July 2014

Not Disclosed

has merged with

July 2014

$86,250,000


June 2014

Not Disclosed


April 2014

$85,698,000


November 2013

$196,350,000

Follow-on Offering

October 2013

Not Disclosed

has sold a majority stake to

November 2012

Not Disclosed

has received a majority investment from

November 2012

$186,000,000


March 2012

$120,500,000


December 2010E Q U I T Y I N V E S T O R SSPECTRUM

(1)

(1)

(1)

(3)

(2)

(3)

(3)

(3)

(1) (2)


IT Security Sector – Q2 2015 Update 6 IT Security Landscape and Market Valuations

IT Security Landscape and Market Valuations

Next-Generation IT Security

Median Market Valuations EV/Revenue: LTM 7.58x 2015E 6.05x

Company Market Cap ($M)

LTM Price Performance

EV/2015E Revenue

EV/2015E EBITDA

2015E Revenue Growth

Palo Alto Networks $12,408.4 131.1% 11.96x NMF 38.2%

Splunk $8,339.9 21.5% 12.41x NMF 33.8%

FireEye $6,765.2 6.2% 10.14x NMF 47.6%

Fortinet $6,507.8 74.9% 6.05x 36.2x 22.4%

Cheetah Mobile(1) $3,250.8 63.1% 5.25x NMF 101.4%

Barracuda Networks(2) $2,154.2 47.4% 6.00x 25.5x 18.3%

Proofpoint $2,126.8 86.4% 8.32x NMF 28.9%

Cyber-Ark Software(1) $2,046.3 318.3% 13.99x NMF 29.7%

Qualys $1,769.9 180.5% 9.76x 37.6x 26.1%

Imperva $1,353.3 94.1% 6.25x NMF 21.2%

Infoblox $1,329.8 20.5% 3.23x 30.6x 19.4%

Gigamon $987.4 83.4% 3.89x 20.6x 34.3%

Varonis Systems $723.5 5.0% 4.66x NMF 29.4%

MobileIron(1) $519.3 (26.1%) 2.77x NMF 9.8%

Imprivata(1) $356.6 (0.5%) 2.29x NMF 25.6%

(1) LTM price performance shows performance since IPO pricing (2) 2015E is estimated LTM as of February 28, 2016

Traditional IT Security

Median Market Valuations EV/Revenue: LTM 3.72x 2015E 3.49x

Company Market Cap ($M)

LTM Price Performance

EV/2015E Revenue

EV/2015E EBITDA

2015E Revenue Growth

Symantec $17,151.6 24.7% 2.44x 7.1x (3.8%)

Check Point Software $15,429.3 30.8% 8.71x 15.5x 8.6%

Trend Micro $4,715.8 6.4% 3.49x 10.0x 6.4%

AVG Technologies $1,233.3 25.7% 3.16x 8.6x 13.1%

VASCO Data Security $1,005.4 119.2% 3.67x 15.5x 15.8%

Zix $254.7 34.6% 4.19x 16.5x 8.8%

Guidance Software $175.3 (34.7%) 1.43x NMF 0.8%

Source: Capital IQ as of May 1, 2015


IT Security Sector – Q2 2015 Update IT Security Sector Market Analysis 7

IT Security Sector Market Analysis

Public Comparable Analysis

Next-Generation IT Security

($ in millions, except per share data)

Company Stock Price 05/01/15

Change Since 52 WK High

LTM Revenue Market Value

Enterprise Value

Enterprise Value/Revenue Enterprise Value/EBITDA 2015E Revenue Growth LTM 2015E 2016E LTM 2015E 2016E

Palo Alto Networks(3) $150.82 (4.7%) $738.9 $12,408.4 $12,210.2 16.52x 11.96x 9.11x NMF NMF 36.8x 38.2%

Splunk, (3) $66.71 (10.9%) $450.9 $8,339.9 $7,489.7 16.61x 12.41x 9.50x NMF NMF NMF 33.8%

FireEye(5) $43.31 (6.7%) $502.1 $6,765.2 $6,367.5 12.68x 10.14x 7.38x NMF NMF NMF 47.6%

Fortinet $38.38 (1.6%) $814.3 $6,507.8 $5,703.9 7.00x 6.05x 5.13x NMF 36.2x 28.0x 22.4%

Cheetah Mobile $22.83 (25.8%) $284.4 $3,250.8 $3,004.0 10.56x 5.25x 2.90x NMF NMF 13.0x 101.4%

Barracuda Networks(4,6) $40.71 (13.0%) $277.4 $2,154.2 $1,966.7 7.09x 6.00x 5.16x NMF 25.5x 24.5x 18.3%

Proofpoint $53.97 (12.8%) $210.7 $2,126.8 $2,097.4 9.96x 8.32x 6.63x NMF NMF NMF 28.9%

Cyber-Ark Software $66.92 (5.1%) $103.0 $2,046.3 $1,869.1 18.15x 13.99x 11.10x NMF NMF NMF 29.7%

Qualys $52.14 (5.0%) $133.6 $1,769.9 $1,642.7 12.30x 9.76x 7.88x NMF 37.6x 29.1x 26.1%

Imperva $45.27 (15.1%) $164.0 $1,353.3 $1,243.6 7.58x 6.25x 5.19x NMF NMF NMF 21.2%

Infoblox(3) $23.47 (7.2%) $267.0 $1,329.8 $1,029.9 3.86x 3.23x 2.72x NMF 30.6x 19.1x 19.4%

Gigamon(1) $29.76 (2.6%) $172.2 $987.4 $820.8 4.77x 3.89x 3.34x NMF 20.6x 16.4x 34.3%

Varonis Systems $29.18 (24.2%) $101.3 $723.5 $611.6 6.04x 4.66x 3.64x NMF NMF NMF 29.4%

MobileIron $6.65 (48.7%) $137.6 $519.3 $402.3 2.92x 2.77x 2.20x NMF NMF NMF 9.8%

Imprivata $14.93 (12.1%) $97.0 $356.6 $279.3 2.88x 2.29x 1.86x NMF NMF NMF 25.6%

Mean $45.67 (13.0%) $297.0 $3,375.9 $3,115.9 9.26x 7.13x 5.58x NMF 30.1x 23.8x 32.4%

Median $40.71 (10.9%) $210.7 $2,046.3 $1,869.1 7.58x 6.05x 5.16x NMF 30.6x 24.5x 28.9%


IT Security Sector – Q2 2015 Update 8 IT Security Sector Market Analysis

Traditional IT Security

($ in millions, except per share data)

Company Stock Price 05/01/15

Change Since 52 WK High

LTM Revenue

Market Value

Enterprise Value

Enterprise Value/Revenue Enterprise Value/EBITDA 2015E Revenue Growth LTM 2015E 2016E LTM 2015E 2016E

Symantec(2) $25.14 (8.0%) $6,615.0 $17,151.6 $15,506.6 2.34x 2.44x 2.39x 8.1x 7.1x 6.9x (3.8%)

Check Point Software $83.95 (4.8%) $1,526.2 $15,429.3 $14,150.9 9.27x 8.71x 8.08x 17.2x 15.5x 14.3x 8.6%

Trend Micro $34.94 (4.0%) $961.6 $4,715.8 $3,572.6 3.72x 3.49x 3.38x 10.4x 10.0x 9.7x 6.4%

AVG Technologies $23.87 (2.9%) $383.3 $1,233.3 $1,338.7 3.49x 3.16x 2.91x 11.3x 8.6x 8.2x 13.1%

VASCO Data Security $25.43 (20.1%) $227.8 $1,005.4 $856.3 3.76x 3.67x 3.33x 16.7x 15.5x 13.7x 15.8%

Zix $4.47 (3.2%) $51.3 $254.7 $229.8 4.48x 4.19x 3.77x 26.1x 16.5x 13.2x 8.8%

Guidance Software $5.85 (42.0%) $108.7 $175.3 $157.1 1.45x 1.43x 1.36x NMF NMF 25.2x 0.8%

Mean $29.09 (12.2%) $1,410.6 $5,709.3 $5,116.0 4.07x 3.87x 3.60x 14.9x 12.2x 13.0x 7.1%

Median $25.14 (4.8%) $383.3 $1,233.3 $1,338.7 3.72x 3.49x 3.33x 14.0x 12.7x 13.2x 8.6%

Note: Financials shown on calendar year basis unless otherwise noted LTM as of December 31, 2014 or as otherwise noted (1) LTM as of March 28, 2015 (2) LTM as of January 2, 2015 (3) LTM as of January 31, 2015 (4) LTM as of February 28, 2015 (5) Adjusted for the effect of the 2013 Mandiant acquisition (6) 2015E and 2016E is estimated LTM as of February 28, 2016 and 2017, respectively Source: Capital IQ as of May 1, 2015


IT Security Sector – Q2 2015 Update M&A Activity 9

M&A Activity

Select IT Security Transactions

($ in millions) Enterprise Value / Date Announced Acquiror Target

Enterprise Value

LTM Revenue

LTM EBITDA

4/21/15 NA NA NA

4/20/15 $2,300.0 NA NA

4/14/15

/

NA NA NA

4/7/15

NA NA NA

4/7/15 $826.5 3.83x 65.6x

4/2/15 $80.0 NA NA

4/1/15 NA NA NA

3/31/15 $20.0 1.67x NA

3/10/15 $2,400.0 3.69x 12.0x

3/2/15 $40.0 NA NA

2/18/15

NA NA NA

2/10/15 NA NA NA

1/13/15 NA NA NA

1/6/15

NA NA NA

12/9/14 $710.0 NA NA

12/4/14 $52.4 0.54x 7.9x

12/1/14

NA NA NA

11/18/14 NA NA NA

11/5/14

NA NA NA

11/5/14 $420.0 NA NA


IT Security Sector – Q2 2015 Update 10 M&A Activity



Enterprise Value

LTM Revenue

LTM EBITDA

10/30/14 NA NA NA

10/23/14 $35.0 NA NA

10/21/14 $232.5 NA NA

10/14/14 NA NA NA

10/2/14

(Certain Assets) NA NA NA

9/4/14 $15.0 NA NA

9/3/14

$220.0 6.60x NA

9/2/14

$310.0 3.10x NA

8/13/14 $300.0 5.00x NA

8/11/14 NA NA NA

8/8/14

$890.0 NA NA

8/7/14

NA NA NA

8/6/14

NA NA NA

7/31/14 NA NA NA

7/31/14 NA NA NA

7/29/14 NA NA NA

7/21/14 $205.0 NA NA

7/7/14 NA NA NA

7/1/14

(MNS Holdings) $28.2 0.84x NA

6/11/14 NA NA NA

5/27/14 NA NA NA





Enterprise Value

LTM Revenue

LTM EBITDA

5/21/14

$15.0 NA NA

5/20/14 $24.0 NA NA

5/6/14 $60.0 8.60x NA

5/1/14 NA NA NA

4/22/14 NA NA NA

3/21/14

NA NA NA

3/19/14 $200.0 NA NA

3/18/14 $15.0 1.50x NA

2/19/14 $350.0 4.70x NA

2/13/14 NA NA NA

2/10/14

$100.0 NA NA

1/22/14 $1,540.0 15.00x NA

1/17/14 NA NA NA

1/6/14 NA NA NA

1/2/14 $1,050.0 9.50x NA

12/17/13 NA NA NA

12/9/13 $47.8 2.50x NA

12/2/13 $370.0 7.40x NA

12/2/13 $84.0 5.70x NA

11/11/13 $25.0 1.10x NA

11/7/13 NA NA NA

http://www.highcloudsecurity.com/news/highcloud-joins-forces-with-hytrust/


IT Security Sector – Q2 2015 Update 12 M&A Activity



Enterprise Value

LTM Revenue

LTM EBITDA

10/16/13 / NA NA NA

10/1/13 $310.0 14.10x NA

9/30/13 $20.0 NA NA

9/18/13 NA NA NA

9/17/13

NA NA NA

9/3/13 NA NA NA

8/20/13 $300.0 8.30x NA

8/15/13 $900.0 25.70x NA

7/23/13

$2,161.4 9.28x NMF

7/8/13

$225.0 9.00x NA

6/26/13 (Mobility Services) NA NA NA

6/25/13 NA NA NA

6/17/13

$204.6 NA NA

6/10/13

NA NA NA

6/5/13 NA NA NA

5/22/13 $225.0 18.80x NA

5/20/13 $966.2 2.69x 17.8x

3/6/13 $376.2 7.00x NMF

4/29/13

$17.4 1.05x 6.0x

4/9/13 NA NA NA

4/3/13 NA NA NA

http://www.bip.lu/index.html

http://www.utimaco.com/





Enterprise Value

LTM Revenue

LTM EBITDA

3/11/13 $125.0 3.30x NA

1/29/13 NA NA NA

Sources: Capital IQ, 451 Research, and Dealogic as of May 1, 2015


IT Security Sector – Q2 2015 Update 14 Equity Capital Markets Activity

Equity Capital Markets Activity

IPOs and Follow-on Offerings

($ in millions)

Pricing Date Issuer Security Sector Offering Size Ticker Symbol Exchange Deal Type

3/11/15 CyberArk Account security $204.0 CYBR NASDAQ FO

9/23/14 CyberArk Account security $85.8 CYBR NASDAQ IPO

6/25/14 Imprivata Identity and access management $75.0 IMPR NYSE IPO

6/12/14 MobileIron Mobile device management/security $99.9 MOBL NASDAQ IPO

5/08/14 Cheetah Mobile Mobile security $168.0 CMCM NYSE ADS

2/27/14 Varonis Data protection and management $105.6 VRNS NASDAQ IPO

11/5/13 Barracuda Networks Security and storage $85.7 CUDA NYSE IPO

10/22/13 Gigamon Network visibility $196.4 GIMO NYSE FO

9/19/13 FireEye NG malware and APT protection $303.5 FEYE NASDAQ IPO

6/12/13 Gigamon Network visibility $128.3 GIMO NYSE IPO

10/17/12 Palo Alto Networks Next-generation firewall $302.4 PANW NYSE FO

10/4/12 Infoblox IP address management $100.0 BLOX NYSE FO

10/3/12 LifeLock Identity theft protection $141.3 LOCK NYSE IPO

9/27/12 Qualys Vulnerability scanning/SaaS $104.5 QLYS NASDAQ IPO

7/19/12 Palo Alto Networks Next-generation firewall $299.5 PANW NYSE IPO

7/19/12 Splunk Analytics/systems management $381.5 SPLK NASDAQ FO

4/19/12 Infoblox IP address management $138.0 BLOX NYSE IPO

4/19/12 Proofpoint Application security/SaaS $94.0 PFPT NASDAQ IPO

4/18/12 Splunk Analytics/systems management $263.9 SPLK NASDAQ IPO

2/1/12 AVG Technologies Endpoint protection $128.0 AVG NYSE IPO

11/8/11 Imperva Data protection $103.5 IMPV NYSE IPO

Note: Blue text indicates a William Blair transaction Sources: Capital IQ and Dealogic as of May 1, 2015


IT Security Sector – Q2 2015 Update Minority Equity Raises 15

Minority Equity Raises

Select Transactions Since January 1, 2014

($ in millions)

Date Announced Target Investor(s)

Transaction Value Business Description

04/15/15 Skyport Systems Sutter Hill Ventures; Index Ventures; Intel Capital

$30.0 Skyport Systems develops enterprise security and hyper-secured infrastructure solutions for critical IT and corporate assets.

04/14/15 Duo Security Benchmark Capital; Redpoint Ventures; True Ventures; Radar Partners; Google Ventures

$30.0 Duo Security provides two-factor authentication as a service to prevent account takeover and data theft.

04/08/15 Niara New Enterprise Associates; Venrock; Index Ventures

$20.0 Niara develops and offers cyber and enterprise security software.

04/08/15 Palerra August Capital; Norwest Venture Partners; Wing Venture Partners; Engineering Capital

$17.0 Palerra provides security coverage for cloud platforms in North America and internationally.

04/02/15 CrossChx Khosla Ventures; Drive Capital $15.1 CrossChx provides healthcare intelligence solutions.

04/01/15 HyTrust AITV; Cisco; Intel Capital; Trident Capital; EPIC Ventures; Granite Ventures; VMware; Fortinet; Vanedge Capital; City National Bank, Investment Arm

$33.0 HyTrust, a cloud security automation company, provides administrative control, visibility, auditing, and data security for private, hybrid, and public clouds.

03/31/15 Tanium Andreessen Horowitz $52.0 Tanium provides security and systems management solutions to allow real-time data collection to enterprises and Fortune 500 customers.

03/26/15 Security Innovation

Brook Venture Partners $4.0 Security Innovation provides security solutions for enterprise applications risk profiles.

03/26/15 BetterCloud Accel Partners; Tribeca Venture Partners; Millennium Technology Value Partners; Greycroft Partners; Flybridge Capital Partners; New Amsterdam Growth Capital

$25.0 BetterCloud provides software-as-a-service solutions for organizations operating on the Google applications platform.

03/26/15 PhishMe Paladin Capital Group; Aldrich Capital Partners

$13.0 PhishMe develops a spear phishing awareness training software-as-a-service solution.

03/25/15 August Bessemer Venture Partners; Maveron; Rho Ventures; Comcast Ventures; Industry Ventures; QUALCOMM Ventures; SoftTech VC; Cowboy Ventures

$38.0 August operates as a home automation company that develops and offers August Smart Lock, an encrypted locking technology.

03/24/15 Lookingglass NB Alternatives; Alsop Louie Partners; NB Private Equity Partners

$20.0 Lookingglass develops cyber threat intelligence monitoring and management platforms.

03/24/15 Rsam JMI Equity $32.1 Relational Security Corporation, doing business as Rsam, develops and delivers governance, risk, and compliance (GRC) management software.

03/09/15 InAuth Bain Capital Ventures $23.5 InAuth provides mobile fraud prevention and mobile application security.

03/05/15 Elastica Mayfield Fund; Pelion Venture Partners; Third Point Ventures

$30.0 Elastica provides cloud security solutions for businesses and their employees.

02/26/15 Exablox Norwest Venture Partners; U.S. Venture Partners; DCM; Dell Corporate Ventures

$16.0 Exablox provides data storage solutions for companies.

02/25/15 Dtex Systems Norwest Venture Partners; Wing Venture Partners

$15.0 Dtex Systems develops and provides secure user activity solutions.


IT Security Sector – Q2 2015 Update 16 Minority Equity Raises


($ in millions)



02/18/15 Zimperium Sierra Ventures; Samsung; TOYO; Lazarus; Telstra Ventures

$12.0 Zimperium, a mobile cybersecurity company, develops Mobile Intrusion Prevention System.

02/18/15 Pindrop Security Institutional Venture Partners; Redpoint Ventures; Felicis Ventures; Andreessen Horowitz; Webb Investment Network; Citi Ventures

$35.0 Pindrop Security provides caller-ID products to detect, report, and mitigate phone fraud.

02/18/15 Sqrrl Data Atlas Venture; Matrix Partners; Rally Ventures

$7.0 Sqrrl Data develops Sqrrl Enterprise, a scalable big-data platform for building real-time analytical applications.

02/13/15 Vidder Onset Ventures; Voyager Capital; Presidio STX

$12.0 Vidder designs and develops custom security solutions.

02/11/15 Digital Shadows Storm Ventures; Passion Capital; Ten Eleven Ventures

$8.0 Digital Shadows is a cyber-threat intelligence company that provides protection from data loss and targeted cyber-attack for organizations.

01/28/15 Adallom Index Ventures; Rembrandt Venture Partners; EMC; Sequoia Capital; Hewlett Packard Ventures

$30.0 Adallom develops security solutions for sensitive and regulated data.

01/13/15 RedSeal OVP Venture Partners; Sutter Hill Ventures; Venrock; Tyco; Leapfrog Ventures; Icon Ventures; Math Venture Partners; Pallasite Ventures; DRW Ventures

$18.5 RedSeal develops and delivers proactive security intelligence solutions for customers in commercial, government, and nonprofit sectors worldwide.

12/31/14 iSight Partners Bessemer Venture Partners $35.0 iSight Partners provides cyber-threat intelligence solutions.

12/19/14 Synack Kleiner Perkins Caufield & Byers; Allegis Capital; GGV Capital; Icon Ventures; Google Ventures; Greylock Partners

$25.0 Synack provides a cloud-based platform that enables customer data integrity, privacy, and confidentiality.

12/17/14 Rapid7 Technology Crossover Ventures; Bain Capital Ventures

$30.0 Rapid7 provides security data and analytics software and cloud solutions.

12/16/14 OneLogin Charles River Ventures; Scale Venture Partners; The Social+Capital Partnership

$25.0 OneLogin provides on-demand identity and access management solutions for organizations.

12/10/14 Ionic Security Kleiner Perkins Caufield & Byers; MeriTech Capital Partners; JAFCO Ventures; TechOperators; Google Ventures

$40.2 Ionic Security offers a unified data and mobility security platform.

12/9/14 DB Networks Grotech Ventures; Khosla Ventures; Citi Ventures

$17.0 DB Networks provides behavioral analysis solutions for intrusion detection and database security.

12/4/14 ThreatStream General Catalyst Partners; Institutional Venture Partners; Paladin Capital Group; Google Ventures

$22.0 ThreatStream provides a threat intelligence platform that identifies cyber threats and facilitates trusted threat sharing.

12/2/14 NowSecure Baird Venture Partners; Jump Capital; Math Venture Partners

$12.5 NowSecure, formerly viaForensics, provides digital forensics consulting and security services.

11/19/14 Icebrg Madrona Venture Group; Formation8 Partners

$3.1 Icebrg provides network security solutions.

11/19/14 CipherCloud T-Venture Holding; Delta Partners; Andreessen Horowitz; Emerging Markets TMT; Transamerica Ventures

$50.0 CipherCloud provides cloud information protection solutions.

11/18/14 Menlo Security Osage Partners; General Catalyst Partners $10.5 Menlo Security provides cyber security software.




($ in millions)



11/11/14 Evident.io True Ventures; Bain Capital Ventures $9.9 Evident.io provides cloud security services.

11/11/14 Forter New Enterprise Associates; Sequoia Capital

$15.0 Forter provides online retailers with plug-and-play real-time technology that enables e-commerce fraud prevention services.

11/10/14 Avalara Warburg Pincus $100.0 Avalara provides cloud-based software that delivers sales tax and other transactional taxes compliance solutions,

11/7/14 Endgame Bessemer Venture Partners; Columbia Capital; Kleiner Perkins Caufield & Byers; Paladin Capital; Top Tier Capital

$30.0 Endgame provides security solutions using data science to deliver intelligence and visibility into the digital domain.

11/7/14 Datashield Huntington Capital $4.0 Datashield provides data security and managed security, and security consulting services to the mid-market clients in North America.

11/06/14 SecureKey Rogers Ventures Partners; Blue Sky Capital Corporation

$19.0 SecureKey Technologies develops platform-as-a-service based hardware and software solutions for chip-based identity and payment technologies in online and mobile transactions.

11/5/14 CloudLock Ascent Venture Partners; Bessemer Venture Partners; Cedar Fund

$6.7 CloudLock is a cloud data security company.

10/23/14 Illumio Accel Partners; General Catalyst; BlackRock; Andreessen Horowitz; Formation8

$100.5 Illumio offers cloud security internet services in California.

10/22/14 Prelert Sierra Ventures; Intel Capital; Fairhaven Capital Partners; Fairhaven Capital Partners

$8.1 Prelert develops and delivers predictive analytics software.

10/22/14 Spikes Security Benhamou Global Ventures; Javelin Venture Partners; Lakewood & Company

$11.0 Spikes Security provides security software solutions to businesses.

10/14/14 Loggly Matrix Partners; Trinity Ventures; True Ventures; Cisco Investments; Harmony Partners; Data Collective

$15.0 Loggly develops a cloud based application intelligence solutions for app developers.

9/22/14 Duo Security Benchmark Capital; True Ventures; Radar Partners; Google Ventures

$12.0 Duo Security provides two-factor authentication as a service to prevent account takeover and data theft.

9/17/14 Sentrix Cedar Fund; Magma Venture Partners $6.0 Sentrix provides cloud-based website security solutions for enterprises.

9/16/14 Vahna International Investment & Underwriting NA Vahna provides an IT security platform for the detection and mitigation of cyberattacks on workstations and servers.

9/16/14 eSentire Edison Partners; VentureLink; Cisco Investments; Georgian Partners; Northleaf Capital Partners

$14.0 eSentire provides managed security solutions to help guard the intellectual property and infrastructure of enterprises.

9/12/14 Agari Data Alloy Ventures, Inc.; Battery Ventures; Scale Venture Partners; First Round Capital

$15.0 Agari Data provides e-mail security solutions.

9/11/14 Ping Identity Draper Fisher Jurvetson; Kohlberg Kravis Roberts & Co; SAP Ventures; General Catalyst; W Capital

$35.0 Ping Identity provides cloud identity security and management solutions.

9/10/14 Light Cyber Battery Ventures; Glilot Capital Partners $10.0 Light Cyber develops solutions for identifying and preventing cyber-attacks and advanced persistent threats.




($ in millions)



8/27/14 Veracode Wellington Management Company $40.0 Veracode provides a cloud-based application security platform.

8/27/14 MetricStream Goldman Sachs Merchant Banking; Kaiser Permanente Ventures; Sageview Capital

$60.0 MetricStream provides enterprise governance, risk, compliance, and quality management services.

8/13/14 Lookout Accel Partners; Andreessen Horowitz; Bezos Expeditions; Goldman Sachs

$150.0 Lookout develops cloud-based consumer mobile device security applications.

08/11/14 Phantom Cyber Foundation Capital; Rein Capital $2.7 Phantom Cyber accelerates and amplifies network security operations.

7/29/14 ThetaRay Jerusalem Venture Partners; General Electric; Paolim Ventures

$10.0 ThetaRay offers malware detection and prevention solutions.

7/22/14 Privacy Analytics BDC Venture Capital; Ontario Institute for Cancer Research, Endowment Arm; Vanedge Capital

$3.5 Privacy Analytics provides organizations with data anonymization solutions to safeguard and enable data for secondary purposes.

7/22/14 EdgeWave TVC Capital $6.0 EdgeWave develops and markets on demand, on-premises, and hybrid secure content management solutions.

7/11/14 LogRhythm Adams Street Partners; Access Venture Partners; Riverwood Capital

$40.0 LogRhythm operates as a security intelligence company.

7/10/14 Malwarebytes Highland Capital Partners $30.0 Malwarebytes provides anti-malware software solutions.

7/8/14 Bay Dynamics Comcast Ventures $8.0 Bay Dynamics provides information risk intelligence and IT analytics solutions.

6/19/14 ForgeRock Accel Partners; Foundation Capital; MeriTech Capital Partners

$30.0 ForgeRock provides open-source identity and access management solutions.

6/19/14 Skyhigh Networks Sequoia Capital; Salesforce.com; Greylock Partners

$40.0 Skyhigh Networks provides security, compliance, and governance solutions for cloud services.

6/18/14 Prevalent Fulcrum Equity Partners $4.0 Prevalent provides software solutions and services, and cloud-based compliance and risk solutions.

6/17/14 Kony Insight Venture Partners; Hamilton Lane; SoftBank Capital; Georgian Partners; Delta-v Capital; Telstra

$50.0 Kony provides a multichannel application development platform.

6/17/14 Virtru Bessemer Venture Partners $6.0 Virtru provides digital content privacy and security solutions.

6/16/14 CounterTack Razor's Edge Ventures $5.0 CounterTack provides in-progress attack intelligence and response solutions.

6/11/14 White Ops Grotech Ventures; Paladin Capital Group $13.1 White Ops provides online fraud detection solutions.

6/10/14 Exabeam Norwest Venture Partners; Aspect Ventures $10.0 Exabeam offers data security solutions.

6/9/14 Okta Sequoia Capital; Janus Capital Group; Khosla Ventures; Andreessen Horowitz; Altimeter Capital Management; Greylock Partners

$75.0 Okta provides cloud application management services.




($ in millions)



6/2/14 Fortscale Security Blumberg Capital; Intel Capital; Swarth Investments

$10.0 Fortscale Security helps enterprises defend themselves against targeted attacks and cyber campaigns.

5/29/14 Observable Networks

Brooke Private Equity; Vectis; Stifel Nicolaus Weisel

$2.5 Observable Networks provides network security technology and threat detection services.

5/28/14 HackerOne Benchmark Capital $9.0 HackerOne provides a solution for security vulnerability disclosure.

5/28/14 Distil Foundry Group; IDEA Fund Partners; ff Venture Capital; Bullet Time; Militello Capital

$10.0 Distil offers cloud-based software-as-a-service that protects online content.

5/21/14 Silent Circle Cain Capital $30.0 Silent Circle offers a mobile application that allows users to send encrypted media from their mobile devices.

5/20/14 RiskIQ Battery Ventures; Summit Partners $25.0 RiskIQ provides a software-as-a-service product that eliminates online and mobile threats.

5/20/14 Sumo Logic Accel Partners; Sequoia Capital; Sutter Hill Ventures; Greylock Partners

$30.0 Sumo Logic provides log management and analytics services.

5/16/14 Centrify Samsung Venture Investment Corporation; Fortinet; DoCoMo Capital; Keating Capital

$42.0 Centrify provides integrated software solutions that centrally control, secure, and audit access to cross-platform systems.

5/16/14 Dashlane Bessemer Venture Partners; Rho Ventures; FirstMark Capital

$21.7 Dashlane provides consumer Internet application for online transactions and activities.

5/15/14 Verafin Spectrum Equity Investors $60.0 Verafin provides compliance, anti-money laundering, and fraud detection software.

5/15/14 OpenDNS Cisco Investments; Greylock Partners; Lumia Capital; Northgate Capital Group; Sequoia Capital

$35.0 OpenDNS provides Internet security and domain name system services.

5/15/14 Netskope Accel Partners; Lightspeed Venture Partners; The Social+Capital Partnership

$35.0 Netskope provides a SaaS-based platform that helps people get and use their favorite cloud applications safely.

5/14/14 Sift Science Union Square Ventures; Spark Capital Partners; First Round Capital; Spark Capital

$18.0 Sift Science is an online platform that helps clients to fight fraud with large-scale machine learning.

5/1/14 CertiVox Octopus Investments; NTT Docomo Ventures $8.0 CertiVox Limited provides encryption, key management, and identity management solutions for corporations, governments, and individuals.

4/29/14 Vorstack TechOperators; EMC Ventures; Aligned Partners

$5.2 Vorstack provides shared threat intelligence and collaboration solutions.

4/21/14 Area 1 Security Kleiner Perkins Caufield & Byers; Allegis Capital; First Round Capital; Cowboy Ventures

$2.5 Area 1 Security provides a threat intelligence solution for eliminating socially engineered cyber-attacks.

4/21/14 Damballa Adams Street Partners; Imlay Investments.; InterWest Partners; Noro-Moseley Partners; Palomar Ventures; Sigma Partners

$13.0 Damballa provides security solutions that protect from cyber threat attacks used for organized crime.

4/17/14 EyeVerify Sprint; Qihoo 360 Technology; Samsung Electronics; Mid-America Angels

$6.3 EyeVerify provides biometric solutions for mobile devices.

4/16/14 FireHost The Stephens Group $25.0 FireHost provides HIPAA and PCI compliant cloud hosting solutions to protect websites and business assets.




($ in millions)



4/15/14 TeleSign Adams Street Partners; Summit Partners; March Capital Partners; March Capital Partners

$49.4 TeleSign provides phone-based verification, authentication, and notification services through SMS and voice messaging.

4/14/14 ZeroFOX New Enterprise Associates; Core Capital Partners; Genacast Ventures

$10.3 ZeroFOX provides real-time social threat analytics, intelligence, and advanced security protection.

4/9/14 HackSurfer Boulder Ventures; CNF Investments $3.5 HackSurfer is a cybercrime threat awareness platform.

4/9/14 GreenSQL Jerusalem Venture Partners; Magma Venture Partners; Gandyr Investments; Rhodium; Atlantic Capital Partners; 2B Angels

$7.0 GreenSQL provides unified database security solutions for small and medium businesses, and enterprise markets.

4/2/14 Sookasa Accel Partners; First Round Capital; Andreessen Horowitz; SV Angel

$5.0 Sookasa protects sensitive files across cloud services and devices.

3/19/14 Verdasys Brookline Venture Partners; Fairhaven Capital Partners; General Electric

$12.0 Verdasys provides enterprise information protection solutions.

3/11/14 ThreatMetrix Adams Street Partners; August Capital; CM Capital Investments; Tenaya Capital; U.S. Venture Partners

$20.0 ThreatMetrix provides a cloud-based fraud prevention platform for online businesses.

3/6/14 Optio Labs Allied Minds $10.0 Optio Labs develops mobile security technologies.

3/2/14 Wickr Alsop Louie Partners; Knight Foundation; Juniper Networks

$9.0 Wickr provides a mobile application that provides military-grade encryption of text, picture, audio, and video messages.

2/26/14 CounterTack Arsenal Venture Partners; OnPoint Technologies

$3.0 CounterTack provides in-progress attack intelligence and response solutions.

2/25/14 CyberSense BRM Group; Opus Capital $5.0 CyberSense provides cloud-based and on-premise cyber security solutions.

2/25/14 Ionic Security ff Venture Capital; Google Ventures; JAFCO Ventures; Kleiner Perkins Caufield & Byers; TechOperators; Webb Investment Network

$25.6 Ionic Security offers a unified data and mobility security platform.

2/24/14 Bitium Amplify.LA; Double M Partners; Karlin Ventures; Lazerow Ventures; Polaris Partners; Resolute Ventures; Social Leverage

$6.5 Bitium develops and delivers a SaaS-based operating system to manage Web-based apps.

2/21/14 Shape Security Allegis Capital; Google Ventures; Kleiner Perkins Caufield & Byers; Norwest Venture Partners; Sierra Ventures

$40.0 Shape Security develops web defense products that protect e-commerce and social network websites.

2/20/14 THREATSTREAM Google Ventures; Paladin Capital Group $4.0 THREATSTREAM develops and delivers a threat intelligence platform.

2/20/14 Cylance Fairhaven Capital Partners; Khosla Ventures; The Blackstone Group

$20.0 Cylance is a math-based threat detection and prevention company.

2/18/14 FireLayers YL Ventures NA FireLayers creates solutions that empower organizations to control and protect their cloud applications.

2/13/14 CloudPassage Benchmark Capital; MeriTech Capital Partners; Musea Ventures; Shasta Ventures; Tenaya Capital

$25.5 CloudPassage provides server security products for public and hybrid cloud hosting environments.

2/11/14 Cybereason Charles River Ventures $4.6 Cybereason operates an automated platform to protect against cyber-attacks.




($ in millions)



2/10/14 Bit9 .406 Ventures; Atlas Venture; Highland Capital Partners; Kleiner Perkins Caufield & Byers; Sequoia Capital

$38.3 Bit9 provides threat protection solutions for endpoints and servers.

2/5/14 AVAST Software CVC Capital Partners NA AVAST provides security software for PCs, smartphones, and tablets for businesses and home users.

1/23/14 CloudLock Ascent Venture Partners; Bessemer Venture Partners; Cedar Fund

$16.5 CloudLock is a cloud data security company.

1/23/14 UNIKEN Nexus Venture Partners $4.8 UNIKEN provides an enterprise security technology platform for banks and financial institutions.

1/21/14 Aorato Accel Partners; Glilot Capital Partners; Innovation Endeavors

$10.0 Aorato provides a technology that protects enterprise resources from advanced cyber-attacks.

1/20/14 Adallom Index Ventures; Sequoia Capital Israel $15.0 Adallom develops security solutions for sensitive and regulated data.

Sources: Capital IQ, 451 Research, and Dealogic as of May 1, 2015


IT Security Sector – Q2 2015 Update 22 Notes

Notes


William Blair is a trade name for William Blair & Company, L.L.C. and William Blair International, Limited. William Blair & Company, L.L.C., is a Delaware company and is regulated by the Securities and Exchange Commission, The Financial Industry Regulatory Authority, and other principal exchanges. William Blair International Limited is authorized and regulated by the Financial Services Authority ("FSA") in the United Kingdom. William Blair & Company® only offers products and services where it is permitted to do so. Some of these products and services are only offered to persons or institutions situated within the United States and are not offered to persons or institutions outside of the United States. This material has been approved for distribution in the United Kingdom by William Blair International Limited, and is directed only at professional clients and eligible counterparties (as defined in COBS 3.5 and 3.6 of the FSA Handbook). This advertisement is not intended to be investment advice. William Blair & Company | 222 West Adams Street | Chicago, Illinois 60606 | +1 312 236 1600 | williamblair.com May 6, 2015 IT Security Sector – Q2 2015 Update Disclosures 23

Disclosures

William Blair’s investment banking group combines significant transaction experience, rich industry knowledge, and deep relationships to deliver successful advisory and financing solutions to our global base of corporate clients. We serve both publicly traded and privately held companies, executing mergers and acquisitions, growth financing, financial restructuring, and general advisory projects. This comprehensive suite of services allows us to be a long-term partner to our clients as they grow and evolve. From 2010-2014, the investment banking group completed more than 330 merger-and-acquisition transactions worth $73 billion in value, involving parties in 36 countries and five continents, was an underwriter on more than 20% of all U.S. initial public offerings, and raised nearly $100 billion in public and private financing.

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