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Network Detection and Response Acquisition: Bain, Crosspoint Buy ExtraHop

Private equity firms Bain Capital and Crosspoint Capital Partners are acquiring network detection and response (NDR) security software company ExtraHop for $900 million, the firms have disclosed.

This is technology M&A deal number 312 that MSSP Alert and sister site ChannelE2E have covered so far in 2021. See all technology M&A deals for 2021 and 2020 listed here.

ExtraHop was on a path toward a potential IPO ahead of the acquisition. The company apparently generated about $100 million in annual recurring revenue in 2020, though exact figures are not disclosed.

ExtraHop is a cloud-centric business, offering security capabilities for Amazon Web Services, Microsoft Azure, Google Cloud Platform and more. The cloud-based platform can also take inventory of all devices, while monitoring sensitive data movements throughout customer networks.

The ExtraHop partner program, known as Panorama, promotes opportunities for VARs, global alliance partners, service providers (MSPs, MSSPs and MDR providers), and MSPs as resale partners.

ExtraHop Acquired: Executive Leadership Remains In Place

ExtraHop CEO Arif Kareem and co-founders Jesse Rothstein, Chief Technology Officer, and Raja Mukerji, Chief Customer Officer, will continue in their respective roles. Rothstein and Mukerji will also remain significant investors in the Company.

ExtraHop is the first dedicated investment made from Bain Capital Fund XIII, the firm's latest flagship $11.8 billion private equity fund. ExtraHop also is among the first investments in Crosspoint Capital Fund I, a $1.3 billion private equity fund focused on the cybersecurity, privacy, and infrastructure software sectors.

The deal is expected to close in the summer of 2021.

ExtaHop Acquired: Executive Perspectives on Cybersecurity Market Opportunity

In a prepared statement about the deal, Kareem said:

"Organizations today face an array of incredibly sophisticated cyber attacks with diverse motivations that run the gamut from theft of sensitive personal and business data to illicit profit. Attackers have long had the advantage, and we're on a mission to change that. By combining our exceptional team, market need, and technology with the deep domain expertise and resources of Bain Capital and Crosspoint Capital, ExtraHop has the opportunity to grow faster and accelerate our innovation to help our customers defend their operations from even the most advanced threats."

Added David Humphrey, a managing director at Bain Capital Private Equity:

"As the events of the last few weeks make crystal clear, cybersecurity is now a mission-critical requirement in the strategy and operations of every organization on the planet, with enormous implications for financial and reputational well-being. We believe that network detection and response is the next major cybersecurity segment and that ExtraHop has the best enterprise technology in the space."

Noted Max de Groen, a managing director at Bain Capital Private Equity:

"The Company's approach is uniquely positioned to help enterprises defend against the most advanced cyber threats and address the security challenges of multi-cloud environments, enterprise IoT, and hybrid workforces. We are thrilled to join the talented team at ExtraHop, in partnership with Crosspoint Capital, to help accelerate the growth of the business and continue advancements in the art of cyber defense.

Said Greg Clark, managing partner at Crosspoint Capital:

"After many years of building and delivering network visibility into the cyber industry, I was very impressed with the capabilities of ExtraHop in their ability to protect the evolving network as workloads shift to the cloud and networks expand beyond what corporations control. When you're under attack, deep visibility into east-west traffic is vital for modern defense and ExtraHop has set itself apart in this emerging category with powerful AI and behavior-based analytics."

Concluded Ian Loring, managing partner at Crosspoint Capital:

"ExtraHop brings a unique level of visibility into networks and delivers sophisticated real-time detection, investigation, and response capabilities to organizations around the world. We are excited to partner with the ExtraHop team and Bain Capital to support the Company in the next chapter of its growth."

The transaction is expected to close in the summer of 2021 and is subject to customary closing conditions, including receipt of regulatory approvals.

ExtraHop Buyout: Deal Advisors

Multiple third parties advised on the deal. Examples include:

  • Qatalyst Partners is serving as the exclusive financial advisor to ExtraHop, and Wilson Sonsini is serving as legal counsel.
  • Morgan Stanley & CO. LLC is serving as the financial advisor to Bain Capital and Crosspoint Capital, and Ropes & Gray LLP is serving as legal counsel.
  • PwC is serving as the accounting advisor to Bain Capital.
Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.