Security policy management firm Tufin (NYSE: TUFN) has agreed to be acquired by investment firm Turn/River Capital for approximately $570 million in cash.
The deal value could spike higher, as the agreement includes a 30-day “go-shop” period which gives Tufin’s board until May 5, 2022 to solicit or facilitate additional acquisition proposals from third parties.
Given Tufin’s cash position and valuation compared to other companies in the cybersecurity sector, investors should hope and push for a higher sale amount.
The company is in the early innings of transitioning from a perpetual licensing model to a subscription-based model, something typically lauded by Wall Street.
While the $13.00 per share all-cash offer represents a 44 percent increase over Tufin’s closing share price on April 5, 2022, the amount is less than the $14.00 per share price when the company went public in April 2019.
Shares of the company reached nearly $30 per share in July 2019, and were trading at more than $18 per share in January 2021.
While there is no guarantee that another bid will surface, there is a potential for a bidding war over the cybersecurity firm, especially considering the high valuations on both private and public companies in the sector.
At $570 million, the valuation comes in at less than 5x projected 2022 revenues, a considerably low multiple when compared to most other publicly traded cybersecurity firms.
The company’s full year 2021 revenue was a record $110.9 million, with subscriptions representing roughly 56 percent of new license bookings for the year. As of December 31, 2021, Tufin had $89.4 million in total cash, cash equivalents, restricted cash and marketable securities.
While Tufin’s Board of Directors has approved the agreement with Turn/River Capital, shareholders will have a chance to vote and should hope that a competitive bid comes in.
If the transaction is completed, Tufin will become a private company.
“We believe Turn/River Capital is the ideal partner for Tufin as the Company makes further progress to a subscription-based revenue model,” said Tom Schodorf, the Lead Independent Director of the Tufin Board of Directors. “We are confident this transaction with Turn/River will allow Tufin to accelerate this transition, expand to new markets, and reach new customer segments.”
“Tufin is an industry leader in network security policy management, helping enterprise customers secure their most critical network infrastructure and cloud assets,” said Dominic Ang, Founder and Managing Partner of Turn/River Capital.
If no competitive bids come in, the transaction is expected to close in the second quarter of 2022, subject to customary closing conditions, including approval by Tufin shareholders and receipt of regulatory approvals.