Security systems integrator Accuvant has agreed to sell a majority stake of its business to Blackstone Group, a private equity firm, in a move the firm said would help Accuvant expand its business.
Financial terms of the transaction were not disclosed. Accuvant said its management and existing shareholder Sverica International LLC, a private equity investment firm, will invest alongside Blackstone in the transaction. The transaction is expected to close in April following regulatory approvals.
Denver-based Accuvant was founded in 2002. It achieved revenue of $577 million in 2013 and realized an average compound growth rate of nearly 32 percent per year over the last five years, and has been steadily moving up the CRN Solution Provider 500 list. It is currently ranked at No. 60.
In addition to selling security software and hardware, Accuvant has a services arm that provides implementation, consulting and 24x7 monitoring. It also provides post-intrusion detection and remediation services. Accuvant said it has more than 100 vendor partners, and about 85 percent of its revenue comes from repeat business. Accuvant competitors include FishNet Security and Forsythe Solutions Group, Deloitte, Verizon Business and others that offer clients a mixture of security consultant services, technology deployment assistance and managed services. All of the firms have been consistently growing their security practices in recent years.
Businesses are making significant investments in information security, driven by high-profile data breaches and other cybersecurity threats, and that is creating an opportunity for Accuvant to expand the business with new offerings, said Dan Burns, Accuvant co-founder and CEO.
"This new investment by Blackstone will enable us to accelerate our pace of innovation and expansion, and to deliver new services and solutions that meet the constantly evolving needs of the global market," Burns said.
Accuvant hired Jason Clark as its new chief security and strategy officer in December following a three-year stint at security vendor Websense. Clark, who also served as chief information security officer at The New York Times and Emerson Electric, told CRN in January that he is helping the company establish stronger relationships with C-level executives. The company is known for its strong research team. Accuvant LABS consists of 250 researchers and consultants. More than half of the company’s employees are technical resources -- engineers and consultants -- spanning all areas of the company's expertise.
Accuvant also opened a new Cybersecurity Research and Operations Center in 2013 in the Baltimore-Washington corridor as part of a strategy to establish a stronger federal presence through its federally focused cybersecurity business unit. The facility includes its Security Operations Center (SOC) and managed services business unit. The company currently counts roughly 900 federal, state and local clients.
Blackstone said its investment in Accuvant is part of a strategy to build out its technology portfolio. The company said it has made small minority investments in emerging security companies, including Carbon Black/Bit9, iSIGHT Partners, Secure Mentem, WatchDox and Cylance. Other recent investments include Pactera Technology International, China's largest IT outsourcing company, and Kronos, a leading global provider of workforce management software and services.
Dave Johnson, senior managing director in Blackstone’s Private Equity Group, called the Accuvant deal a strategic investment for Blackstone. Accuvant can "become the dominant player in its rapidly growing and important industry," he said in a statement.
Partners told CRN that the systems integrator space is a difficult business and investors rarely get what they had envisioned from deals. Sales reps often move from one firm to another, and they bring with them a loyal group of clients. It's an area where you have to keep costs under control and grow recurring revenue over time, said Chris Allman, president of Dallas-based Tech10 Networks. Allman said it is very likely that Accuvant has a strong services business and renewals organization.
"Integrators are more secure now if they have monthly recurring revenue through some kind of managed service," Allman said. "There is an interest in investing in the security space like never before, and if an organization like Accuvant has a strong team of engineers, a good sales force and customers that are loyal, they've got a good future ahead of them."
PUBLISHED MARCH 11, 2014