[Dataloss] Fwd: [ISN] Security titans weigh in on buyout environment

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Seems topical:



>http://news.com.com/Security+titans+weigh+in+on+buyout+environment/2100-7350_3-6040297.html
>
>By Dawn Kawamoto
>Staff Writer, CNET News.com
>February 15, 2006
>
>SAN JOSE, Calif.--Psst buddy, got a security company to sell?
>
>Security companies that are privately held and in the business of
>protecting information from espionage and offering up secure access
>are attractive among potential buyers, a panel of security titans and
>bankers said here Thursday during the RSA Conference 2006.
>
>The panel, speaking to a standing-room-only crowd, addressed the
>current mergers and acquisition environment for security companies, as
>well as what it takes for them to gain interest in potential buyout
>candidates.
>
>The current valuation for privately held security companies, based on
>projecting out future revenues, is a mean of slightly more than 6.5
>times those revenues. But valuations for publicly traded security
>companies are substantially lower, said Rob Owens, vice president of
>equity research for Pacific Crest Securities and panel moderator.
>
>"Most of the innovation comes from smaller companies," said Parveen
>Jain, executive vice president of corporate development and strategy
>for McAfee, in explaining the difference between valuing a private
>security company and a public one.
>
>Another issue for buyers is public companies tend to be more mature,
>offering less potential revenue growth, said Michael Cristinziano,
>vice president of strategic development for Citrix, which acquired SSL
>VPN start-up Net6 for $50 million two years ago.
>
>He added that the ability of a potential buyout target to add to his
>company's earnings within a 12-month period is a key consideration on
>whether to do a deal.
>
>Symantec, which has been on a tear with acquisitions big and small,
>wants its potential lifelong partners to have frank discussions with
>the security giant on its financial outlook and performance. James
>Socas, senior vice president of Symantec's corporate development,
>recalled a time when a private company provided financial information
>that showed declining revenues over a three-year period, yet had a
>forecast of more than doubling its revenues in the following year.
>
>McAfee, meanwhile, hones in on the candidate's operating team,
>assessing whether they can deliver on the technology and financial
>numbers they have projected, and be flexible if changes are needed to
>their business plan.
>
>In providing a broad view of areas in which they are interested in
>making acquisitions, Jain said McAfee finds areas that need addressing
>include industrial spying, or the tampering and theft of information.
>
>Symantec is anticipating more companies will find it incumbent to take
>on the role of managing their own security, similar to what consumers
>have done. Citrix is focusing on deals that will provide its customers
>with the "best access experience," Cristinziano said.
>
>Technology to solve the leakage of sensitive information is an area
>that a number of large potential buyers are interested in, said
>panelist Neel Kashkari, an investment banker with Goldman Sachs.
>
>Kashkari noted Microsoft's entry into the antivirus market has had a
>negative effect on start-ups in a similar market that are seeking
>funding or a buyout.
>
>"It's created an overhang with valuations," he noted.
>
>A number of security companies are turning to a buyout, rather than
>going public, as a means to pay back initial investors, the panelists
>noted, pointing to NetScreen Technologies' 2002 IPO as the last
>"meaningful" public offering of a security company.
>
>The regulatory environment, including Sarbanes-Oxley, has made
>executives of private companies more hesitant to go public, rather
>than selling their operations, the panelists said. Another issue is
>that single product security companies are finding Wall Street is less
>receptive in the post-bubble environment.
>
>And then there are the attractive valuations for privately held
>security companies, in the current climate.
>
>"Mergers and acquisitions are white hot right now," Socas said. "We've
>seen a lot of good companies on the private side."
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