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FishNet CEO: Accuvant Merger About Growth, Not Layoffs

FishNet Security and Accuvant are not looking to lay off employees as part of their merger, according to FishNet's CEO, and will instead need to grow head count to take on new business.

FishNet Security and Accuvant are not looking to lay off employees as part of their merger, according to FishNet CEO Rich Fennessy.

"This is not a consolidation … to go do a lot of layoffs," Fennessy told CRN in an interview. "This is a strategy of growth."

Fennessy said the combined company will need to grow its head count in order to take on new business. He noted that FishNet brought on 150 new employees in 2013 to drive top- and bottom-line growth.

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"We're a people business, so we'll continue to add people," Fennessy said.

FishNet and Accuvant, America's two largest security solution providers -- ranked No. 46 and 48 on the CRN SP500, respectively -- agreed this week to join forces, creating a 1,400-worker, $1.5 billion information security behemoth with operations in every corner of North America.

"They would like to be the Home Depot of security," said Martin Wolf, founder and president of MartinWolf, a global M&A investment adviser focused on service provider business models. "This is a very big deal."

The size of the combined company will allow it to have considerably more leverage when negotiating with vendors, Wolf said. With additional resources, Wolf said Accuvant and FishNet should be able to create proprietary solutions, take on more managed services and bolster their recurring revenue model.

The deal, however, also will put the squeeze on small and midsize regional security partners, he said, forcing them to either consolidate or risk becoming irrelevant.

"Go big, or go home," advised Wolf, who said he was very surprised by the deal.

Fennessy, a longtime IBM executive and former CEO of solution provider Insight, has overseen five M&A transactions during his career.

He said Investcorp, an international investment firm that bought a majority stake in FishNet in January 2013, brought him in as CEO in November 2013 to get FishNet ready for a sale.

Though financial details of the transaction were not disclosed, Fennessy said Investcorp sold its share of FishNet to Blackstone at a significant premium, thanks to the company's growth since early 2013.

"From my perspective, the job has been completed successfully," said Fennessy, who plans to leave the company in late summer, roughly six months after the transaction closes.

FishNet and Accuvant had discussed coming together since 2008, but Fennessy said that didn't become possible until March, when Blackstone, a private equity firm, acquired a majority stake in Accuvant.

That provided Accuvant with the capital needed to pull out a deal, said Dan Wilson, Accuvant's senior vice president of partner solutions, and serious conversations began shortly thereafter.

Despite their overlapping areas of expertise, FishNet and Accuvant share few customers. Of the 10,000 companies doing business with either Accuvant or FishNet, just 100 have $50,000 in transactions with both solution providers, Fennessy said.

Denver-based Accuvant has a strong presence in Canada and the Western United States, Fennessy said, while Overland Park, Kan.-based FishNet is strongest in the Central United States and has a London office. The companies are about equally strong In the Northeast, he said.

Both Fennessy and Wolf said it's been challenging to keep up with demand for security services, with a customer backlog necessitating a two- to three-month wait for FishNet's new managed services clients.

The joint company plans to invest heavily in attracting top talent from colleges around the globe, showcasing their technology on university campuses. Once the deal goes through, Fennessy expects recruiters to have a much easier sell.

"We're become the destination location where people want to work," Fennessy said, "because we're the clear market leader."


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