Sophos for Sale: Thoma Bravo Offers $3.9B

The endpoint security market today saw the start of another acquisition with private equity firm Thoma Bravo offering to acquire Sophos for $7.40 per share, or about $3.9 billion. Sophos' board of directors plans to "unanimously recommend" the offer to its shareholders.

Thoma Bravo has more than $35 billion in investor commitments and has acquired more than 200 software and technology companies. In recent years it has tightened its focus on security with acquisitions of Barracuda, Veracode, Imperva, and LogRhythm. In 2017 it bought a minority stake in McAfee as part of its spinout from Intel and was rumored to buy the company. The private equity firm has also invested in Blue Coat, ConnectWise, Digicert, and Entrust.

Now it has eyes on UK-based endpoint security firm Sophos, which offers security tools for endpoint protection, managed services, firewall, and public cloud to a customer base of 400,000 businesses. Its recent acquisitions include Rook Security, DarkBytes, and Avid Secure.

Thoma Bravo approached Sophos in June, and the two companies have been in talks since, Sophos CEO Kris Hagerman said in an interview with Dark Reading. If all goes as planned, the acquisition should be complete and the deal closed sometime in the first quarter of 2020.

"We feel that given Thoma Bravo's track record in cybersecurity, and experience and knowledge in that space, they're in a great position to accelerate Sophos' leadership in next-gen endpoint security," Hagerman says. "I think in many ways we see this as an exciting validation of Sophos' strategy, our position in the market, and our future opportunity."

The Endpoint Evolution

The Sophos acquisition is one of many transactions affecting the endpoint security market, which is undergoing transformative change as its many players begin to consolidate. "There are probably too many vendors coming at this market in different ways, so a degree of simplification is in order," says Rik Turner, principal analyst at Ovum, of the ongoing shift.

Among some of the notable endpoint deals thus far are VMware's acquisition of Carbon Black, Blackberry's purchase of Cylance, and HP's acquisition of Bromium, for example.

Sophos, to its credit, has at least sought to break out of endpoint into other offerings, Turner notes. Its portfolio includes network security and cloud security tools. It does not need this acquisition to survive, Turner points out, but to prosper. Sophos has been stuck without massive visibility compared with its competitors in the endpoint security market likely because it never had a consumer business, for one, and it started as a UK company, Turner explains.

Is this a sign of endpoint consolidation? Potentially, he says, if Sophos is merged into another endpoint outfit. However, it now seems the company is going private to accelerate. Private equity firms are taking businesses private to grow and potentially go public again in the future.

"There's a big shift going on in the cybersecurity market," says Hagerman, as customers shift to cloud-enabled products and the next wave of advanced threats. He believes the market is seeing a greater gap between companies focused on new tech, and those falling behind.

"My view is that what you're seeing is a further separation of the companies who are embracing and driving that shift to next-gen cybersecurity," he explains, noting how this acquisition could enable Sophos to remain competitive moving forward.

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