PE Firm Gets Cold Feet With $1.9 Billion Acquisition of Forescout Technologies

Forescout Warns That Acquisition by PE Firm Advent International May Not Happen

Enterprise device security firm Forescout Technologies (NASDAQ: FSCT) said on Monday that private equity firm Advent International would not be moving forward as planned with its $1.9 billion acquisition of Forescout that was announced in February.

In a deal that was originally scheduled to be complete during Q2 2020, Advent had agreed to acquire all outstanding shares of Forescout common stock for $33.00 in cash, a premium of nearly 20% over Forescout’s closing share price on February 5, 2020.

Shares of ForeScout plummeted nearly 25% to $22.50 per share at the time of publishing, giving the company a market cap of roughly $1.1 billion.

“On May 15, 2020, Advent provided notice to Forescout that it would not be proceeding to consummate the acquisition of Forescout on May 18, 2020, as scheduled,” Forescout said in its announcement. “Forescout and Advent are engaged in ongoing discussions regarding timing to close and the terms of the transaction. There can be no assurance that Forescout and Advent will be able to reach agreement on terms.”

News of Advent pulling back came the same day as it was reported that Fortinet has sued Forescout for allegedly violating three patents held by Fortinet that came from its 2018 acquisition of Bradford Networks. 

“This is an uncertain time for everyone, as businesses and communities across the world navigate the challenges created by the COVID-19 pandemic,” said Michael DeCesare, CEO and President of Forescout. “We continue to believe that Advent is the right partner for Forescout and we remain committed to completing the transaction in the near-term. We thank our employees for their extraordinary efforts and commitment to Forescout, and we remain focused on continuing our course of advancing our innovation roadmap and strategic cloud and business transformation.”

Forescout and Advent have already received all necessary approvals to complete transaction.

In 2016, Forescout raised $76 million in funding at a $1 billion valuation, and became a public company after its initial public offering (IPO) in October 2017.

In November 2018, Forescout acquired operational technology (OT) network security firm SecurityMatters for approximately $113 million in cash to expand its industrial cybersecurity offerings. 

Forescout had $336.8 million in revenue in 2019, an increase of 13% over 2018, according to financial results released on February 6, 2020.