Defining the future of cyber security: Symantec buys Blue Coat for $4.65bn

August 2016 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

In a deal which many analysts say will define the future of cyber security, technology security firm Symantec and cyber security company Blue Coat entered into a definitive agreement under which Symantec will acquire Blue Coat for approximately $4.6bn in cash.

Symantec intends to finance the transaction with cash on the balance sheet and $2.8bn of new debt. In addition, private equity firms Silver Lake and Bain Capital have agreed to invest $500m and $750m respectively, with David Humphrey, a managing director of Bain Capital, due to be appointed to Symantec’s board of directors following the close of the transaction.

Symantec also expects to realise $550m in run-rate cost savings, of which $400m will come from a previously announced Symantec cost efficiency programme.

Once the acquisition is complete, the combined company will: (i) protect customers against more cyber threats, with best-in-breed protection, detection and remediation across endpoint, email, web, network and servers; (ii) help deliver security for the cloud generation of users, data and apps, for the cloud, from the cloud and to the cloud; and (iii) bring together a formidable scale of investment in cyber R&D and threat research.

“With this transaction, we will have the scale, portfolio and resources necessary to usher in a new era of innovation designed to help protect large customers and individual consumers against insider threats and sophisticated cyber criminals,” said Dan Schulman, chairman of Symantec. “Together, we will be best positioned to address the ever-evolving threat landscape, the massive changes introduced by the shift to mobile and cloud, and the challenges created by regulatory and privacy concerns.

“Greg (Clark) and the entire Blue Coat leadership team have done an exceptional job of strengthening, growing and scaling their business. In addition to a proven track record of delivering scale and profitable growth, Greg brings significant leadership experience, deep security expertise and a history of successfully integrating companies into a single portfolio.”

Expected to be appointed chief executive of Symantec and to join the company’s board upon closing of the transaction, Greg Clark, chief executive officer of Blue Coat, said: “Symantec keeps global enterprises, governments and individual consumers protected with solutions across threat protection, information protection and managed services. Likewise, Blue Coat is the trusted source for protecting billions of web transactions daily and is the clear leader in the growing cloud security market.

“Once combined, we will offer customers around the world – from large enterprises and governments to individual consumers – unrivalled threat protection and unmatched cloud security. With employees of Blue Coat and Symantec coming together, we will be well positioned to drive meaningful growth and push the boundaries of innovation. I am very excited about the opportunity to join Symantec as CEO and look forward to working with the strongest, deepest team in security to realize the many strategic and financial benefits this transaction will create.”

Acting as lead financial adviser to Symantec is J.P. Morgan, with Barclays, BofA Merrill Lynch, Citi, J.P. Morgan and Wells Fargo Securities financial advisers. Fenwick & West LLP and Simpson Thacher & Bartlett LLP are acting as legal advisers. For Blue Coat, Goldman, Sachs & Co is acting as lead financial adviser alongside Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC, also acting as financial advisers. Ropes & Gray and Wilson Sonsini Goodrich & Rosati are acting as legal advisers to Blue Coat.

The Symantec/Blue Coat transaction, which has been approved by the boards of directors of both companies, is expected to be completed in the third calendar quarter of 2016, subject to the satisfaction of customary closing conditions, including applicable regulatory approvals.

Fraser Tennant