Cybersecurity services firm KEYW Corporation (NASDAQ: KEYW) announced after the bell on Thursday that it would acquire Sensage, Inc., a Redwood City, California-based provider of Security Information and Event Management (SIEM) and event data warehousing solutions, in a cash and stock deal valued at up to $34.5 million.
KEYW, which mainly caters to the defense and intelligence community, is looking to expand its commercial customer base and sees Sensage’s SIEM solutions, technology, and team as an important part of “Project G”, a cyber awareness and response platform that KEYW is preparing to launch.
“Sensage brings advanced cyber intelligence technology and an executive team with extensive commercial product experience that is highly relevant to bringing Project G to general availability early next year,” said Leonard Moodispaw, CEO and President of KEYW Corporation.
“Cyber awareness begins with the ability to absorb and relate large quantities of cyber operations and security data within an enterprise,” Moodispaw added. “Today these data overwhelm most organizations’ capabilities to observe and respond to hostile activity within their network environments until it is too late. By joining forces, KEYW and Sensage will offer a new level of cyber awareness to both commercial and government markets.”
Sensage, with roughly 40 employees, claims over 450 enterprise and government customers around the world, and has raised about $40 million in funding since its launch.
Under the terms of the definitive agreement, KEYW will pay up to $18.0 million in cash and up to $16.5 million in KEYW common stock to Sensage shareholders. Of that, $7.5 million of the stock and $3 million of the cash consideration is contingent upon Sensage meeting certain revenue targets for the second half of 2012.
Having raised $40 million and selling at even the top end of the $34.5 million, the deal can hardly be called a homerun for SenSage’s investors, but still something that appears to be a good fit for the company, and a good match for KEYW’s strategy. Additionally, if KEYW continues to grow, Sensage investors could eventually be rewarded with an attractive return on the stock portion of the deal.
“This is the 14th acquisition since being founded,” Ed Jaehne, Chief Strategy Officer with KEYW told SecurityWeek in a call Thursday.
“We don’t pay ‘top dollar’ but we do offer a fair price including equity because we want people who join us to share in the future of KEYW – we want and expect management to be a key part of KEYW post acquisition,” KEYW’s own publicly posted acquisition rules explain.
SecurityWeek spoke with SenSage CEO Joe Gottlieb on Thursday, who appeared to be quite happy about the future of the company, and to be part of KEYW as it continues its growth as a provider of advanced cybersecurity services.
“Sensage is thrilled to become part of the KEYW team, building out solutions that combine uniquely scalable technologies and advanced expertise to solve the most difficult security problems on the planet,” Gottlieb said in a statement. “Our work with proactive security teams in both commercial and government environments produces a fountain of sophisticated analytics and best practices that we share across all customers. KEYW’s Cyber Awareness and Response Platform will take all of this to the next level, integrating automated platforms on customers' premises with cyber black belts in the cloud.”
“We’re hooking up with a very unique buyer,” Gottlieb told SecurityWeek. “We’re hooking up with a very advanced cyber security systems integrator. Being able to combine the capability on the services and personnel side with what we are doing in terms of a very scalable platform for cyber awareness, makes for an awesome combination to make our customers more effective in running security operations.”
"In my view, other recent SIEM acquisitions have resulted in a consolidation and commoditization of the SIEM market place that is evolutionary, at best,” said Richard Schaeffer, KEYW Advisory Board member and advisor to Sensage, cyber security expert, consultant and former Director of Information Assurance at the United States National Security Agency. “The combination of mission-grade experience and solutions from KEYW and big data analysis and commercial product expertise from Sensage is a refreshing and potentially disruptive move for the SIEM market, signaling that a much-needed next generation of solutions is on its way.”
Other notable acquisitions in the SIEM space include HP’s $1.6 billion acquisition of SIEM giant ArcSight in 2010, and in 2011, IBM’s acquisition of Q1 Labs, McAfee’s purchase of NitroSecurity and TripWire’s acquisition by private equity firm Thoma Bravo. TIBCO also acquired LogLogic in a deal announced in April, 2012.
On the Venture capital front, AlienVault, a San Mateo, California-based company behind open source SIEM, OSSIM, closed a $22.4 million Series C funding round in July. Additionally, SIEM vendor LogRhythm, announced in June that it had closed a $15 million Series D round of funding led by Siemens’ Venture Capital group. Both AlienValut and LogRhythm are sure to be prime acquisition targets as M&A in the cybersecurity industry continues.
The Sensage transaction is expected to close in October 2012, subject to Sensage equity holder approval and other customary closing conditions.