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MSSP Sells Security Software Business Unit to ArchTIS

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Cipherpoint (CPT), an MSSP headquartered in Australia, has sold certain security software assets to ArchTIS. The deal's valuation is roughly 3.8X to 7X annual recurring revenue (ARR), depending on certain financial earn-out metrics, according to MSSP Alert calculations.

This is technology M&A deal number 594 that MSSP Alert and ChannelE2E have covered so far in 2021. See all technology M&A deals for 2021 and 2020 listed here.

The asset sale will allow CTP to focus on its managed security services business -- including the Brace168 acquisition of January 2021 -- according to CTP.

Security Products and M&A Financial Math

ArchTIS gains a Microsoft SharePoint protection solution, a data discovery and classification platform, certain customer contracts, along with technology and European operations. Also, CPT will retain the right to resell the products.

The deal's financial details, according to this Cipherpoint disclosure, include:

  • $1.4 million in cash;
  • $200,000 in escrow; and
  • a potential $1 million in deferred consideration based on various financial targets.

Meanwhile, ArchTIS says the acquired assets generate roughly $370,000 in annual recurring revenue. Roll all the figures together, and MSSP Alert arrived at that 3.8X to 7X ARR valuation.

Cipherpoint Doubles Down On Managed Security Services

In a prepared statement about the deal, Cipherpoint Chairman Ted Pretty said:

“This transaction is compelling. Following the sale, CPT’s annual operating costs will reduce by approximately $1.06 million with a very modest impact on revenue. This significantly strengthens our cashflow position. Cipherpoint will now focus on its managed security services business including Brace168. Cash from the sale will be deployed to drive further growth in our managed services business both organically and by potential acquisitions.”

Cipherpoint is expected to share more details about its MSSP business strategy after the end of the September 2021 quarter, the company indicated.

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.