$12.3 Billion Proofpoint Private Equity Deal Worries MSPs

…business email comprise (BEC), which doesn’t rely on bad attachments and URLs. Traditional email security systems can’t detect BEC, because it tends to use social pretexting rather than malware. As a result, many new email security vendors are solely tackling BEC-style attacks and make no pretense of providing secure email gateway. Omdia calls this new type of player “non-SEG.”

“Of course, the secure email gateway community hasn’t sat still, adding functionality of its own to compete with the no-SEG players, but the presence of Microsoft in their neighborhood inevitably puts pressure on their bottom lines, as even Proofpoint, the market leader in SEGs, demonstrates,” Turner said.

Partner Impact

Proofpoint noted last year that it had completely pivoted from fully direct sales to “100% channel.”

“We have now completely converted into a channel company, and all new business going forward goes through the channel,” an executive told Channel Futures in February 2020.

However, it remains to be seen how partners will respond to the news. MSP Reddit users seem less than thrilled. Multiple commenters wrote that private equity acquisitions typically hamper research and development efforts.

Dave Sobel, host of the Business of Tech podcast, advised MSPs to keep a watchful eye.

Dave Sobel

“As I note every time an acquisition happens, the product today is the same as the product yesterday. The deal isn’t done, but assuming it happens, expect them to run the same playbook Thoma Bravo leverages,” said Sobel, who added that the “playbook” typically features additional M&A. “Thoma Bravo is buying security companies, so I’d guess a rollup. What that playbook doesn’t promise is R&D investments. For MSPs, it means judge the company based on today’s product, not on any future promises, and have a ‘show me’ attitude to those promises.”

Analyst Perspective

Wedbush Securities’ Daniel Ives called the transaction a “very attractive offer” from Proofpoint’s perspective. He predicted that no other suitors will emerge during the 45-day period. In addition, Ives predicted a proliferation of tech M&A.

“In this cybersecurity arms race and with $500 billion of dry powder among PE/financial buyers and strategic players, we expect a massive M&A spree in the software and cybersecurity space over the next 12-18 months,” Ives said.

Proofpoint first launched in 2002 before going public in 2012. In February, the company announced that it was buying InteliSecure for $62.5 million. InteliSecure provides managed services for data loss protection.