TRUSTED M&A

ADVISOR TO THE
CYBERSECURITY
SECTOR

MONTHLY SNAPSHOT
August 2019

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 ABOUT CHERTOFF CAPITAL

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Chertoff Capital is an industry leading investment
bank serving high-growth, mission-focused
companies in the national security, information
security, and government technology markets.
As the investment banking subsidiary of The Chertoff
Group, Chertoff Capital works closely with senior JASON KAUFMAN KANAD VIRK
executives and subject matter experts across the President Principal
entire firm to provide our clients with a highly 202.552.5297 202.649.4260
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differentiated advisory offering that brings together chertoffgroup.com chertoffgroup.com
our transaction experience with unparalleled
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Chertoff Capital professionals have advised on well
over 100 transactions over the last 20 years in our
sectors of focus.

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Senior Director Director
202.552.5275 202.552.5258
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chertoffgroup.com chertoffgroup.com

Select Investment Banking Transactions:

An investment group
led by

a portfolio company of a portfolio company of

has received an
has secured Series C has
investment from
has been acquired by acquired
funding from an has been acquired by
undisclosed group
of investors
$710,000,000

Select Strategic Advisory Transactions(1):

a portfolio company of a portfolio company of a portfolio company of

has received an
has acquired
investment from

has acquired has merged with

has acquired

&

(1) Strategic Advisory engagements completed through Chertoff Group, LLC 2

Chertoff Capital, a wholly-owned subsidiary of Chertoff Group, LLC, is a registered broker dealer and member of FINRA and SIPC. Strategic Advisory engagements are completed through Chertoff Group, LLC.
 MARKET COMMENTARY

DoD Digital Modernization Strategy

In July, the DoD released its Digital Modernization Strategy outlining emerging technology needs
in support of the U.S. National Defense Strategy (NDS) and emphasizing the need for
strengthened Cybersecurity
The DoD Digital Modernization Strategy supersedes the DoD’s prior Information Resources Management Strategic
Plan, dated April 2014. The DoD’s approach to IT modernization will focus on the Joint Information Environment
Framework and strengthened cybersecurity. In addition to cybersecurity, other key DoD CIO priorities include
leveraging cloud computing, AI, and enhanced C3.

DoD CIO Four Priorities for Digital Modernization

Cybersecurity C3 Modernization
Dominance and security-first mindset Command, Control, and Communication
will drive everything designed, built, Modernization is critical to Department and
and operated by the DoD Warfighter mission assurance

Artificial Intelligence Cloud

A force multiplier and agent of Modernization is critical to Department
transformation across all DoD function and Warfighter mission assurance

The DoD Operates One of the World’s Largest and most Complex Set of Networks
Snapshot
✓ IT Budget of more than $46.4 billion for ✓ Roughly ten thousand operational
FY 2019 systems

✓ Tens of thousand of servers

✓ Thousands of data centers

✓ Hundreds of thousand of commercial

✓ Millions of computers and IT devices mobile devices

Impact on Cybersecurity M&A Landscape

Modern battlespace extends into space and cyberspace, and to preserve and expand US military advantage in the
new digital operating environment, the DoD must employ IT infrastructure that is agile, resilient, transparent,
seamless, and secure despite persistent cyber threats. Such significance given to modernizing and securing
Defense IT infrastructure creates potential runway for smaller more specialized IT services providers to expand
the breadth and depth of their customer bases, which ultimately could drive further consolidation from some of
the industry’s larger players. As the DoD and other government agencies continue to modernize department
infrastructure, new and developing cyber threats will continue to drive shifts in priorities and strategies, keeping
cybersecurity initiatives at the forefront of public and private policy.
Sources: Department of Defense, Deltek
3
 CYBERSECURITY MONTHLY M&A SNAPSHOT
Date Target Acquirer
Aug-1
Target Description: Provides IT services and solutions to federal and
commercial clients that includes program management, cyber
security, cloud computing, application development, infrastructure
services, and service desk management
Jul-31
Target Description: Software application that provides board of
directors and management teams an ongoing assessment of
potential cyber threats
Jul-29
Target Description: Provides threat intelligence solutions to
businesses, government organizations, and communities to assess
and disseminate risk data and information to manage and mitigate
the impact of critical events
Jul-24
Target Description: Provides defense engineering, analytical
services, and open source software solutions for intelligence and
defense communities
Jul-11
Target Description: Provides IT solutions to the financial industry,
including cloud hosting, managed IT services, cyber security services,
professional consultations, and disaster recovery solutions
Jul-1
Target Description: Provides cybersecurity for US Navy and Coast
Guard shipbuilding and modernization programs
Transaction Notes
• Purchase Price: $250 million
• Revenue / EBITDA: Not Disclosed / Not Disclosed
• Employees: Not Disclosed
• Buyer: Public Strategic (NYSE:PRSP)
• Seller: Private Strategic
• Rationale: Enhances Perspecta’s offerings in cloud,
cyber, digital transformation and enterprise IT that
modernize and transform government mission delivery
• Purchase Price: Not Disclosed
• Revenue / EBITDA: Not Disclosed / Not Disclosed
• Employees: Not Disclosed
• Buyers: Private Strategic
• Seller: Private Divestiture (Gulf Guaranty Insurance)
• Rationale: The acquisition of Gulf Guard Cyber’s
software tool adds to NXTsoft’s cybersecurity suite and
compliments current service offerings
• Purchase Price: $83 million
• Revenue / EBITDA: Not Disclosed / Not Disclosed
• Employees: Not Disclosed
• Buyer: Public Strategic (NasdaqGM:EVBG)
• Seller: Private Strategic
• Rationale: Expands the overall situational awareness
Everbridge will provide organizations and creates an
end-to-end threat assessment and incident
communications and management platform
• Purchase Price: Not Disclosed
• Revenue / EBITDA: Not Disclosed / Not Disclosed
• Employees: Not Disclosed
• Buyers: Private Investor Group Strategic (led by
ClearSky)
• Seller: Private Strategic
• Rationale: Allows Altamira to continue growing
organically and invest in new solutions and acquisitions
• Purchase Price: Not Disclosed
• Revenue / EBITDA: Not Disclosed / Not Disclosed
• Employees: Not Disclosed
• Buyer: PE-backed Private Strategic (M/C Partners)
• Seller: Private Strategic
• Rationale: Expands Thrive’s Financial Services Practice
in the New England region
• Purchase Price: Not Disclosed
• Revenue / EBITDA: Not Disclosed / Not Disclosed
• Employees: Not Disclosed
• Buyer: PE-backed Strategic (AE Industrial Partners, LLC)
• Seller: Private Strategic
• Rationale: Broadens Gryphon’s engineering
capabilities to better serve its core customers with
innovative cybersecurity solutions
4
 CYBERSECURITY SECTOR PERFORMANCE

2-Year Stock Performance

2-Year

200 Cybersecurity 73.3%

S&P 500 20.6%
175 Nasdaq 28.8%

150

125

100

75

Cybsersecurity Index S&P 500 Nasdaq

July 2019 Stock Performance YTD Stock Performance

125 175
Cybersecurity 7.4% Cybersecurity 27.2%
120 165 S&P 500 18.7%
S&P 500 0.5%
115 155 Nasdaq 22.6%
Nasdaq 1.0%
110 145
105 135
100 125
95 115
90
105
85
95
80
85
7/3
7/1

7/5
7/7
7/9
7/11
7/13
7/15
7/17
7/19
7/21
7/23
7/25
7/27
7/29
7/31

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19

Cybsersecurity Index S&P 500 Nasdaq Cybsersecurity Index S&P 500 Nasdaq

Public Metrics
Financial Performance Valuation Multiples
Revenue EBITDA EV/LTM EV/CY 2019E
Company Mkt. Cap EV LTM CY 2019E 2-Yr CAGR LTM CY 2019E Revenue EBITDA Revenue EBITDA
CyberArk Software Ltd. $5,241 $4,775 $390 $422 27.0% $74 $118 12.2x NM 11.3x NM
Qualys, Inc. $3,390 $3,129 $300 $322 18.1% $92 $129 10.4x NM 9.7x 24.3x
Splunk Inc. $20,320 $19,516 $1,916 $2,265 31.5% ($218) $383 10.2x NM 8.6x NM
Rapid7, Inc. $2,923 $2,871 $283 $320 26.2% ($29) $11 10.1x NM 9.0x NM
Proofpoint, Inc. $7,076 $6,950 $800 $880 30.1% ($28) $145 8.7x NM 7.9x NM
Check Point Software Tech. $17,043 $15,428 $1,956 $1,994 3.7% $912 $1,026 7.9x 16.9x 7.7x 15.0x
Palo Alto Networks, Inc. $21,742 $20,267 $2,752 $3,166 26.2% $146 $816 7.4x NM 6.4x 24.8x
Fortinet, Inc. $13,714 $11,951 $1,955 $2,113 18.9% $334 $558 6.1x NM 5.7x 21.4x
FireEye, Inc. $3,152 $3,244 $857 $872 5.7% ($112) $103 3.8x NM 3.7x NM
Sophos Group plc $2,575 $2,695 $711 $685 6.4% $80 $119 3.8x NM 3.9x 22.7x
Symantec Corporation $13,314 $15,723 $4,731 $4,798 0.6% $1,000 $2,064 3.3x 15.7x 3.3x 7.6x
OneSpan Inc. $586 $521 $221 $234 10.0% $0 $23 2.4x NM 2.2x 23.1x
SecureWorks Corp. $973 $893 $525 $540 7.4% ($4) $3 1.7x NM 1.7x NM
Median $5,241 $4,775 $800 $872 18.1% $74 $129 7.4x 16.3x 6.4x 22.7x

5
Note: $ in millions; Source: S&P Capital IQ
 CYBERSECURITY SECTOR PERFORMANCE

Market Valuation Trends Cybersecurity Valuation Multiples

EV / LTM Revenue Multiple EV / LTM Revenue Multiple

9.1x
12.2x

10.4x
10.2x
7.4x 10.1x

8.7x
7.9x
7.4x
5.7x
5.3x 6.1x

4.3x
3.8x 3.8x
3.3x
2.4x
1.7x

7/31/2015 7/31/2016 7/31/2017 7/31/2018 7/31/2019

Revenue Growth and Valuation Multiples

35%

30%

25%
Revenue CAGR (2016-2018E)

20%

15%

10%

5%

0%
0x 2x 4x 6x 8x 10x 12x 14x
EV/LTM Revenue Multiple
6
Source: S&P Capital IQ