yurolaitsalbert - stock.adobe.co
Private equity firm Advent International has agreed to acquire network security vendor Forescout Technologies in an all-cash transaction valued at $1.9 billion.
The transaction, which is expected to close in the second quarter of 2020, will give Advent International all outstanding shares of Forescout common stock for $33 per share. The purchase price is approximately 30% higher than Forescout's closing share price of $25.45 on October 18 (the closing price Wednesday was nearly $28).
Advent is joined by Crosspoint Capital Partners, a private equity investment firm focused on cybersecurity and data privacy technology, as a co-investor and advisor. Once the transaction closes, Forescout will become a private company. CEO and President Michael DeCesare will maintain a leadership position.
"We are still in early innings of a large market opportunity as every organization needs visibility into what is connecting to their network and how to mitigate against high-risk devices, including nontraditional IoT and OT [operational technology] devices," DeCesare said in a press statement. "This transaction represents an exciting new phase in the evolution of Forescout."
Forescout was founded in 2000 and was primarily focused on network access control and security monitoring. In recent years, the company shifted toward OT, IoT and industrial control system security. Forescout went public in 2017, and the IPO raised approximately $117 million.
The acquisition was announced in tandem with Forescout's 2019 fourth quarter earnings, which were below Wall Street expectations. The vendor's fourth quarter revenue was $91.3 million, an 8% year-over-year increase but below analysts' target of approximately $95 million. Net losses for the quarter were $20 million, or $0.42 per share, which was well below analysts' consensus estimate of $0.31 per share.
Forescout also reported a net loss of $118.5 million, or $2.58 per share, for 2019 compared to $74.8 million in the full year 2018, or $1.83 per share.
"This transaction, which is the result of a robust process conducted by the board of directors with the assistance of independent legal and financial advisors, is a testament to the value Forescout has created and the reputation our team has built," Theresia Gouw, chair of the Forescout board, said in a press statement. "In making its determination, the board of directors considered the likely volatility associated with the business model transition to ratable revenue recognition, changes to our go-to-market initiatives, particularly in EMEA, and timing of significant eight-figure deals, while managing to quarterly street estimates as a publicly traded company. We are confident that this transaction is the best path forward for Forescout and our stakeholders."
Chris Steffen, research director at analyst firm Enterprise Management Associates in Boulder, Colo., sees the acquisition as a positive for Forescout. "They've been a leader in the network access control market for so long, and I think that being acquired will give them an opportunity to refocus a little bit," Steffen said. "I know they've had a couple of down quarters, but I think that's the nature of the NAC vertical just in general. When they integrate to the cloud, NAC becomes not as relevant as it used to be. Forescout will be well-served being with a venture capital company that will allow them to innovate at the speed they can."