Contact: Scott Denne
In spending $310m to purchase antifraud vendor 41st Parameter, Experian is paying a healthy 14.1x trailing 12-month revenue. It’s the latest in a recent string of high-value deals in the fraud-protection market, but even at that multiple it’s the lowest of the three recent transactions in this sector. In August, IBM spent an estimated $900m on Trusteer, valuing the company at 25.7x revenue. That doesn’t come close to the multiple that F5 Networks paid for Versafe last month. (Subscribers can click on the following links for more details on the Trusteer and Versafe acquisitions.)
Part of the reason for the high valuations is the trend toward rising valuations of security firms in general as security grabs an increasing portion of IT budgets. Another reason is a maturation of the market, especially the device-identification end of antifraud where 41st Parameter plays. That company and its competitors have been around for about a decade and are now starting to hit their stride: 41st Parameter had roughly $22m in trailing 12-month revenue at the time of its sale, while rivals Iovation and ThreatMetrix have nearly identical revenue as 41st Parameter.
Annual value-to-revenue multiples on security deals
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Source: The 451 M&A KnowledgeBase
Now that those companies have proven that there’s a real business in helping banks, retailers and other businesses identify fraudulent transactions, we’d expect to see more deals happen in this space. 41st Parameter and its peers have had acquisition interest from a variety of vendors – not just traditional security providers, but also banking technology businesses and cloud services companies. This type of technology fits into the product portfolio of any company that enables businesses to connect with consumers.
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