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Private Equity Acquiring Forescout Cybersecurity; Will More Bidders Emerge?

Forescout Technologies, which develops device visibility, control and cybersecurity solutions, is being acquired by private equity firm Advent International for $1.9 billion. Crosspoint Capital Partners also is involved in the deal.

This is M&A deal Number 99 that ChannelE2E and MSSP Alert have covered so far in 2020. See the complete M&A deal list here.

Still, the Forescout company sale isn’t quite a done deal. The M&A agreement includes a 30-day “go-shop” period expiring on March 8, 2020. Translation: Forescout’s board of directors and advisors to solicit alternative acquisition proposals and higher takeover bids from third parties, though there’s no guarantee more bids will emerge.

Assuming the current deal moves forward, the buyout is expected to close in the second calendar quarter of 2020, Forescout predicted.

Forescout’s channel partner program specifically pursues technology partners, resellers, distributors and system integrators. Some of those systems integrators have MSSP (managed security services provider) business practices, though Forescout doesn’t specifically mention an MSSP push on its partner portal.

Forescout Acquired: The Early Buyout Rumors

Rumors about a potential Forescout business sale surfaced in November 2019 — but then went quiet in recent months.

The buyout rumors started around the time that Forescout announced weaker-than-expected 3Q 2019 financial results on November 6, 2019. At the time, Activist investor Corvex Management and its partner, Jericho Capital Asset Management, disclosed a combined 14.5% in ForeScout in October 2019 and said they planned to push for changes at the company, Bloomberg reported at the time.

Fast forward to present day. The company today said Q4 revenue was $91.3 million, compared to $84.7 million. The results included “macro and execution challenges in EMEA,” though the company is taking steps to address areas that are with Forescout’s control, CEO Michael DeCesare said in a prepared statement this morning.

Forescout Acquired: Executive Perspectives

Forescout CEO Mike DeCesare

DeCesare will continue to lead the company post-sale. In a prepared statement about the deal, he said:

“Forescout has established itself as a leader in device visibility and control, with the most advanced platform in the market. 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 non-traditional IoT and OT devices. This transaction represents an exciting new phase in the evolution of Forescout. We are excited to be partnering with Advent International and Crosspoint Capital, premier firms with security DNA and track records of success in strengthening companies and supporting them through transitionary times. We look forward to working with Advent and Crosspoint Capital to advance our strategic objectives and want to thank our employees for their continued hard work and commitment to Forescout.”

Added Theresia Gouw, chair of the Forescout board:

“We are pleased to have reached this agreement with Advent, which delivers significant immediate value to shareholders, and positions Forescout to continue meeting and exceeding the expectations of our customers. 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. 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.”

Bryan Taylor, head of Advent’s technology investment team and a managing partner in Palo Alto, asserted:

“Forescout is an ideal partner for Advent — as it’s a mission-critical business positioned to capitalize on key tech megatrends. The company has differentiated itself from its core competitors with its proprietary, agentless technology, making it ideal for large, complex organizations in a rapidly evolving cyber risk landscape. In partnership with Greg Clark and the Crosspoint Capital team, Advent is thrilled to work with Forescout to build on its record of innovation and continue delivering world-class cybersecurity solutions to customers for years to come.”

Concluded Greg Clark, managing partner at Crosspoint Capital.

“As enterprises continue to shift to the cloud and decentralized networks, today’s chief information security officers are looking for secure solutions to increase visibility and provide orchestration, making their network controls more seamless. Forescout’s platform is already ahead of the curve, and we believe we can further advance the company’s market position by applying the collective experience and expertise in cybersecurity software of the Advent and Crosspoint Capital team.”

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