Swiss Security Giant Kudelski Buys SP500 Superstar M&S Technologies, Eyes More Acquisitions In U.S. As Part Of Global Buildout
Kudelski Group, a $1 billion Swiss security conglomerate, has acquired M&S Technologies, No. 33 on the CRN Solution Provider 500, one of the top security solution providers in the country.
The acquisition of the Dallas-based M&S makes Kudelski Security, which acquired its first U.S. solution provider seven months ago, one of the top three pure-play cyber security solution providers in the country, said Kudelski Security CEO Rich Fennessy. Terms of the transaction were not disclosed.
M&S, which has 46 employees, a slew of Fortune 2000 customers and key security partnerships from the likes of McAfee, Juniper, Fortinet and Sophos, provides Kudelski Security with critical scale as it moves to become a dominant player in the U.S. and throughout the world, said Fennessy.
"In order to deliver great solutions to clients, you need scale," said Fennessy in an interview with CRN. "M&S strengthens our technology and technology services business. It is the next step in our agenda to extend into the U.S. market. You are going to see us continue through acquisitions and organically fill out that footprint across the United States."
Fennessy said he and his team have eyes on expanding into California and the Northeast and are actively eyeing more than 10 companies as potential acquisition targets.
"We continue to be very active looking at cool regional (solution provider) companies and cool technology companies that could accelerate the growth of our strategy," said Fennessy. "Whether that means acquiring two or 10 companies, we'll have to see."
Some regional security solution providers have built robust, local businesses, but are having challenges competing on a national level, with customers demanding national and even global support, said Fennessy.
"We are seeing a great opportunity to bring those companies under the fold and help extend our total value proposition to them and their customers," he said. "Their salespeople and engineers love it because it provides more value to their clients and the partners they have been doing business with."
The Kudelski acquisition spree sets up a security showdown of sorts with other major security solution providers including Optiv Security (the company created from the merger of Accuvant and FishNet Security), which was acquired in December by the private equity arm of global leveraged buyout firm KKR.
Fennessy, the former CEO of FishNet, and one of the driving forces behind the deal that led to the creation of Optiv, said Kudelski's status as a global business without private equity ownership provides the company with a marked advantage in the global security battle.
"We are in this for the long term," he said. "We are trying to build a meaningful company that can expand and scale and really be the trusted advisor for our clients to help them deal with the very complex cybersecurity world we live in. We have a long-term perspective. We are looking to create new innovation and capabilities that may not pay dividends this year or next but long term are what clients need to have to deal with their complex security challenges. A long term mindset is very challenging in a private equity owned environment when it is all about the next quarter. Kudelski Group has been around 65 years and is going to be around another 65 plus years. We are thinking long term."
Fennessy, who stayed on at Optiv for six months as an advisor after the Accuvant and FishNet merger, said Optiv, along with the top four technology consulting businesses in the world, are competitors as Kudelski builds out its global footprint. "I know the Optiv business," he said. "They do a great job in the marketplace, but there is more demand than there is supply of great talent and capabilities."
Kudelski's business model is unique given the security assets that the company holds and its impressive set of services, Fennessy said.
The company has four security pillars: a high-level advisory security consulting business that works with chief security officers; a security reseller and services business with broad vendor partnerships that now includes M&S; its own branded managed security services offering powered by its CyberFusion Center and team; and a customized R&D security innovation unit that works with Fortune 1000 companies.
"We think we have a unique recipe with our CyberFusion Center, but there are other competitors out there like Dell SecureWorks, Trustwave, but the reality is no one takes the four security pillars we have and brings them all together underneath one business. We think we are quite differentiated in the market," Fennessy said.
Kudelski Security, which has 300 employees, already has what it calls a CyberFusion Center in its Phoenix, Ariz. U.S. headquarters, which remotely manages customer security as part of a managed security services offering. The focus on that business is moving to narrow the gap from major breach to detection – which some claim is, on average, 146 days – through advanced technologies and a dedicated team.
Finally, Kudelski Security has 100 security researchers who take on complex R&D challenges for customers developing custom solutions and code.
Kudelski Group, with 3,600 employees and a $200 million research and development arm, is one of the top digital security business providers. It has a set-top box business that competes against Cisco, with a secure chip and software combo that monitors 400 million cable set-top boxes around the world. It also has a physical security business that, for example, is providing the badge security at airports, major ski areas and events including the badge access and physical security at the Davos World Economic Forum.
Mark Miller, one of the principal partners at M&S Technologies, said he and his partner, Sean Stenovitch, were regularly fielding buyout offers but were not interested until Kudelski approached them. The impetus for the deal, he said, was the robust expanded services offerings including high-level security consulting and managed security services that M&S could provide its customers as part of Kudelski Security.
"Those were things our customers were asking us for that we couldn't give them," said Miller. "We just couldn't afford to build those things out. Now we have a broader offering with advisory, incident response, managed services and the CyberFusion Center. This is going to be huge for our customers. We are super excited about it and see nothing but great things for the future."