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Blue Coat Preps For Return To Public Market In $2.4 Billion Sale To Bain Capital

Blue Coat will be acquired by Bain Capital in a $2.4 billion deal designed to prep it for its return to the public market.

Blue Coat Systems said Tuesday that it has entered an agreement to be acquired by private equity firm Bain Capital as the high-flying security company preps to re-enter the public market. Current owner of Blue Coat, Thoma Bravo, said the all-cash deal is estimated to be worth $2.4 billion.

Blue Coat left the public market in 2011 when private equity firm Thoma Bravo purchased it for $1.3 billion. Since then, the company has been on an acquisition and hiring spree. Last year, it acquired Netronome, a maker of SSL appliances, and Solera Networks, which makes a network packet capturing appliance used by digital forensics investigators. The company also recently added Norman Shark, a maker of sandboxing technology used for malware analysis.

Partners expressed confidence that Blue Coat would continue its momentum. "This is a company that is on the right trajectory. We are more profitable with Blue Coat, and our customers are responding to Blue Coat's security infrastructure and solutions," said a CEO of a large partner who asked not to be identified.

[Related: 10 Companies Recently Acquired By A Private Equity Firm]

"We are excited to see Blue Coat take its business to the next level," said the CEO. "So long as that doesn't mean forgetting that the partner community is at the heart of what is making this company successful."

The Blue Coat partner tempered his enthusiasm saying: "The smaller the company, the more driven they are to make sales and enable the partner community. The larger they get, the more we may see them interested [in] pleasing investors, and following their stock quarter-to-quarter and tightening margins. Pay peanuts, and you get monkeys."

Blue Coat COO and President Mike Fey said that the 100 percent channel-driven company looks to drive revenue to $1 billion within three years - up from $450 million in 2012. Its private equity push, Fey said, will include building a stronger integrated platform and making security innovation a primary focus. He added, channel partners were also central to the company's success. "We know when the channel wins we succeed,’ Fey said. ’Our goal is to be more important to the channel and to do that we want to equip our partners to go to war.’


Today, Blue Coat has more than 400 partners and runs separate programs for wireless and global systems integrators. Fey said Blue Coat had a bull’s-eye on rival Websense, FireEye and McAfee. "There is a lot of market share out there and opportunity for growth," he said.

"The world's most trusted brands use Blue Coat, and the acquisition by Bain Capital sets us on the trajectory to further grow our portfolio, better serve our customers and help us prepare to return to the public markets," said Blue Coat CEO Gregory S. Clark in a statement. "Bain Capital has a long history of accelerating growth, and I look forward to partnering with them in our journey to be one of the top-performing security companies in the world."

In December, Blue Coat Systems named McAfee products veteran Michael Fey as its new president chief operating officer, hiring away the executive who has led McAfee's advanced technologies and field engineering activities.

In February, Blue Coat Systems hired two former Intel Security channel executives to bolster its sales strategy. The Sunnyvale, Calif.-based company named Kurt Mills its vice president for Americas, Sales and Field Operations, and Steve Tchejeyan, senior vice president for Americas, Sales and Field Operations.

"We are excited by the opportunity to work with Blue Coat's world-class management team to grow the business organically and through acquisitions, and to ultimately return the company to the public markets," said David Humphrey, a managing director at Bain Capital, in a statement. "We are very impressed with the profitable growth the company has demonstrated and believe strongly in the future growth of the cyber security market and Blue Coat's position in this important sector."

Research firms see Blue Coat as the market leader in secure web gateway appliances, competing against Cisco, Barracuda Networks, Intel Security and Websense. The company introduced a malware detection appliance using its Solera Networks acquisition. The appliance competes directly for enterprise deals with RSA's NetWitness security analytics platform. The deal is subject to regulatory approval with the closing transaction expected within the first half of 2015.

PUBLISHED MARCH 10, 2015

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