Contact: Brenon Daly
There are more than a few echoes of Symantec’s purchase of MessageLabs last October in McAfee’s reach last week for MX Logic. In terms of strategy, both acquisitions added millions of end users of on-demand security to the two largest security software companies, which have been slowly looking to increase that side of their business. MessageLabs had attracted more than eight million users at 19,000 customers, while MX Logic brings more than four million users at 30,000 customers.
As far as deal terms go, both buys were done at a similar valuation. Symantec paid 4.8 times trailing sales for MessageLabs, while we estimate McAfee is paying closer to 4 times trailing sales for MX Logic. (If we include the potential $30m earnout in the price, the multiple hits 4.9 times MX Logic’s trailing revenue.) And, we would add that both deals stand as the largest security transactions of their respective years, with the sales of these private software-as-a-service (SaaS) companies eclipsing the prices paid even for public vendors. Symantec shelled out $695m in cash for MessageLabs, topping McAfee’s $497m pickup of Secure Computing as the largest security deal in 2008. So far this year, McAfee’s $140m purchase of MX Logic is the industry’s biggest security transaction, slightly ahead of the contested take-private of Entrust for $124m.
We also suspect that both SaaS acquisitions will pay dividends for Symantec and McAfee. (We have heard from several sources that Symantec is particularly high on its reach across the Atlantic for MessageLabs.) Undoubtedly, these deals will deliver a higher return than the other large SaaS security acquisition, Google’s pickup of Postini. Done two years ago, that buy handed Postini a valuation that’s twice as rich as either MessageLabs or MX Logic. But unlike the moves by Symantec and McAfee, Google didn’t snag Postini for its security offering. Instead, the search giant had the ill-conceived notion that a startup could serve as the platform for its push of Google Apps. Not surprisingly, that idea hasn’t panned out. We certainly haven’t heard much about Postini in the two years since the search giant bought it.