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F5 Networks to acquire Shape Security for $1 billion

F5 Networks is acquiring Shape Security for approximately $1 billion in a move to strengthen its presence in the application security and anti-fraud markets.

F5 Networks made its largest acquisition yet to bolster its application security presence.

The Seattle-based vendor, which specializes in application delivery services, announced Thursday that it will acquire Shape Security for approximately $1 billion in cash. Shape Security is a privately-held application security vendor based in Santa Clara, Calif. The company, which was founded in 2011, specializes in anti-fraud and abuse protection for web and mobile applications. In September, Shape earned $51 million in Series F funding, bringing the company's total funding to $183 million.

As part of the agreement, F5 will take on will take on Shape Security's 370 employees. In addition, Derek Smith, co-founder and CEO of Shape, as well as the rest of the leadership team there will join F5 Networks in "key management roles."

In a conference call Thursday evening, F5 president and CEO François Locoh-Donou said the Shape Security acquisition was "driven by a vision of the role F5 will play in enabling customers to maximize the value they get from their applications in a multi-cloud world."

Locoh-Donou said the addition of Shape Security moves F5 further to "a software-driven business model" that doubles the company's addressable application security market. He added that major enterprises are constantly fighting against application attacks that defraud them of billions of dollars through stolen credentials, fake accounts and unauthorized transactions.

"The risk to applications is only getting worse," Locoh-Donou said. "And thanks to automation, they're able to launch these attacks at much greater scale. Today, over half of all web traffic that Global 2000 [enterprises] experience comes from non-human actors. In other words, bots are dominating web application layer activity, and this is a recent phenomenon." 

Locoh-Donou said Shape's Enterprise Defense platform addresses those evolving threats. F5 said Shape's technology is deployed on 200 million mobile devices worldwide and each day protects 150 legitimate logins while blocking up to 1 billion automated attacks.

Forrester Research analyst Dr. Chase Cunningham said there's significant potential in the anti-fraud market for F5.

"I think the acquisition made a heck of a lot of sense because the fraud market is going to continue to get bigger and nastier as more applications do more stuff faster on the line of the consumer side of the equation," Cunningham said. "It's  big and it's going to continue to get bigger. I think it's one of the most significant areas for investment in the near future."

The transaction is expected to close in the first quarter of 2020.

Shape marks the second major acquisition for F5 Networks this year. In March, the company acquired NGINX, an application deliver vendor based in San Francisco, for approximately $670 million.

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