Contact: Scott Denne
Trustwave picks up Application Security Inc in a $25m stock deal that highlights the acquirer’s shifting M&A strategy since its aborted IPO attempt two years ago. With this transaction, like the purchase of M86 Security before it, Trustwave is grabbing a business with significant revenue, not just interesting products to roll into its MSSP division.
Like Trustwave, Application Security targets customers under pressure to comply with industry regulations like HIPAA and PCI, so pairing the two businesses together should create upsell opportunities. Application Security made a name for itself in the database security sector, but its growth was hindered by the small size of the market and aging investors with limited capacity to add to the company’s coffers – only one of its four venture investors has raised a fund since 2003 and its most recent round came in 2006.
Though smaller than anti-malware vendor M86, which Trustwave bought early last year (see our estimate of that deal here ), Application Security built a business that, we understand, reliably generated $20-25m in annual revenue, though little growth in the past few years. Still, that revenue will give about a 10% boost to Trustwave’s top line and strengthen its position for a potential IPO.
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