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September 19, 2022
Vista Equity Partners has submitted a proposal to acquire security awareness training provider KnowBe4, which became a public company in April of last year.
KnowBe4 on Monday confirmed the receipt of a proposal from Vista Equity Partners to acquire all outstanding shares of the company for $24 per share in cash. The proposal represents a 39% premium over KnowBe4’s closing price on Sept. 16.
KnowBe4’s U.S. initial public offering (IPO) was worth more than $2 billion.
KnowBe4 said its board of directors regularly considers opportunities to enhance value for stockholders.
“In response to an inquiry from Vista, the board formed a special committee of the board, comprised solely of independent directors … to engage with Vista and take other actions that it deems appropriate, with the assistance of independent financial and legal advisors,” KnowBe4 said.
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Consistent with its mandate, and in consultation with its legal and financial advisors, the KnowBe4 special committee will review the Vista Equity Partners proposal and other potential value creation opportunities to “determine the course of action that it believes is in the best interests of the company and its stockholders.”
“There is no certainty that any transaction will be consummated,” KnowBe4 said. “And KnowBe4 does not intend to comment further until the special committee has concluded its review.”
The U.S. Securities and Exchange Commission required KnowBe4 to disclose the proposal.
Rik Turner is principal analyst at Omdia, which shares a parent company with Channel Futures (Informa).
“If this deal comes to pass, it would mean the last security awareness training/cyber awareness training (SAT/CAT) vendor of the ‘big three’ generation that remained public had been acquired, either by private equity or by another vendor,” he said.
A consortium of Pamplona and BlackRock acquired PhishMe in February 2018 and renamed it Cofense. And Proofpoint acquired Wombat a month later.
“KnowBe4 went public last year on Nasdaq and was predicting profitability in 2023,” Turner said. “But being acquired would enable Vista to strip out some cost and/or do some corporate engineering, potentially merging the company with some other assets to add more functionality and make it a more attractive target, perhaps for acquisition or for flotation further down the road.”
KnowBe4 claims to have been the first SAT/CAT vendor to have focused heavily on content generation and has 11 separate centers for the creation of its media, he said. It employs scriptwriters, directors, actors and all the accompanying people needed to produce mini-movies.
“Before that, the sector was basically producing those static training videos with cartoon-style drawings that were the bane of every corporate employee’s life,” Turner said. “Suddenly SAT/CAT became like a mini-Hollywood experience, or at least that was what its proponents claim. But either way, it’s an expensive process compared with knocking out a few static videos, particularly as the content library must be continually refreshed to remain engaging … and you have to pay all those folks. Localization into different languages only compounds the problem. Thus acquisition by Vista might be a useful outcome for KnowBe4.”
In the last few years, a newer generation of competitors has arisen that focuses far less on media and more on technology, Turner said. They’re running artificial intelligence/machine learning (AI/ML) to recommend which employees need training, and running shorter, less disruptive training programs for individual workers at the appropriate time. Those include CybeReady from Israel and AwareGO from Iceland.
“KnowBe4 itself is now readying something called Security Coach, which uses AI/ML for recommendations and looks a lot like tacit recognition by the market leader that a more tech-led approach is required, at least to complement what it’s doing with its media assets,” he said. “If content is king, then analytics is definitely queen.”
Vista Equity Partners also is acquiring Avalara, a provider of tax compliance automation for businesses of all sizes. It’s an $8.4 billion transaction that will take the company private.
In addition, Vista Equity Partners is acquiring Citrix and is taking it private, too.
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