Thoma Bravo Approaches Symantec About A Takeover: Report

Private equity giant Thoma Bravo has approached Symantec to express interest in purchasing the publicly traded platform security behemoth, according to a Reuters report.

Sources told Reuters that there is no certainty the discussions between Chicago-based Thoma Bravo and Mountain View, Calif.-based Symantec will lead to a deal. Symantec did not immediately respond to a request for comment. Thoma Bravo declined to comment.

Symantec's stock is up $2.58 (12.88 percent) to $22.60 in trading midday Tuesday. However, that's still $6.58 (22.5 percent) below the company's trading price of $29.18 prior to the announcement of an internal accounting probe May 10.

[Related: Symantec Buys Two Firms For Mobile Security, Active Directory Defense]

Such a deal would put Symantec and its top competitor in the hands of the same private equity firm. Thoma Bravo took a minority stake in McAfee in April 2017 as part of the $4.2 billion spinout of the company from Intel led by TPG Capital.

Marc Harrison, president of Marlboro, N.J.-based solution provider Silicon East, said Thoma Bravo’s reported interest in Symantec could result in consolidation among security vendors.

“Considering all of Thoma Bravo’s security holdings, I feel clearly this could lead to some serious consolidation in the security space,” he said.

In a research note on the potential deal, Dan Ives and Strecker Backe, analysts for Webush, a financial services and investment firm in Los Angeles, said a deal for Symantec makes sense given Thoma Bravo's recent $2.1 billion acquisition of Imperva.

"With Imperva recently being acquired by Thoma Bravo for $2.1 billion, it would be a very logical move to seriously look at Symantec’s assets and potentially combine both assets into a broader cybersecurity behemoth under one hood," wrote Ives and Backe in a research report. "We believe in an acquisition Symantec could see a valuation in the $26 to $30 range given past M&A activity/valuations in cybersecurity coupled by the company’s strong installed base and expansive product suite.”

The two analysts said they expect merger and acquisition activity in the cybersecurity market to accelerate over the next 12 to 18 months "as both strategic technology stalwarts and financial buyers look to make their bets going into a massive secular growth cycle over the coming years.”

For its part, Symantec has grappled this year with the internal accounting probe as well as concerns raised by an activist investor.

In September, Symantec finished its internal investigation into concerns raised by a former employee and deferred $12 million of revenue that had been recognized in the quarter ended March 2018. Symantec said $13 million from a customer transaction had been improperly recognized as revenue in the company's fiscal fourth quarter, while just $1 million should have actually been recognized during that time period.

The Audit Committee of Symantec's Board of Directors also identified certain behavior inconsistent with the company's code and conduct and related policies, and referred the matter to the company for appropriate action. However, no employment actions with respect to any of Symantec's highest-ranking executives have been recommended as a result of the investigation.

Also in September, Symantec reached an agreement with activist investor Starboard Value to name three new independent members to its board of directors. The three directors all come from the five-person slate of candidates Starboard proposed nominating to Symantec's board in August, and include a Starboard managing member, a former McAfee interim CEO, and an Arrow Electronics board member.

Starboard said in an August filing with the U.S. Securities and Exchange Commission that it believes shares of Symantec were undervalued at the time of purchase, and that it hopes to change the makeup of Symantec's board to unlock more value.

Thoma Bravo has been extremely active in the cybersecurity space this year, kicking things off with the acquisition of publicly traded storage and security player Barracuda Networks for $1.6 billion in February. Three months later, the private equity firm purchased a majority stake in LogRhythm to accelerate the Boulder, Colo.-based SIEM vendor's operational and product development road map.

In July, Thoma Bravo agreed to buy from investors a majority stake in Centrify to help the Santa Clara, Calif.-based identity management vendor expand its product management capabilities both organically and through acquisitions. In October, Centrify announced plans to spin out its Identity-as-a-Service business into a stand-alone company called Idaptive, which will also be owned by Thoma Bravo.

That same week, Thoma Bravo unveiled its plans to acquire publicly traded application and data protection vendor Imperva. And Monday, Thoma Bravo purchased application security testing vendor Veracode from Brocade for $950 million.