Platform Play Behind Kaseya Acquiring Datto, Other Cybersecurity M&A

Kaseya’s $6.2 billion acquisition of Datto is likely a platform play, which is behind much of the accelerating cybersecurity industry M&A.

That’s according to cybersecurity channel leaders with Trellix, Fortinet, NTT Application Security, Proofpoint, Sophos and Malwarebytes. They discussed cybersecurity M&A during a roundtable at this week’s Channel Partners Conference & Expo.

Also this week, KKR, a global investment firm, announced it is acquiring Barracuda Networks from Thoma Bravo in a deal reportedly worth about $4 billion. Thoma Bravo acquired Barracuda in 2018 in a $1.6 billion cash deal.

Brian Thomas is Malwarebytes’ vice president of worldwide MSP and channel programs. He said what’s driving cybersecurity M&A is “definitely a platform portfolio play.”

“There’s a lot of chatter on social media right now specifically around the Kaseya-Datto piece of this,” he said. “But I’d also say that to put a positive spin out there, especially for our MSPs, is Kaseya was growing 20% annually prior to this acquisition and obviously there is a lot being done right there. So even though there’s so much product overlap between the two that I think will ferret out over the next few years, I think there’s an overwhelmingly positive thing for MSPs out there with simplification that they can offer.”

Proofpoint’s Joe Sykora

Joe Sykora is Proofpoint’s senior vice president of worldwide channels and partner sales. Thoma Bravo acquired Proofpoint last year for $12.3 billion.

“We’ll continue to see a consolidation for MSPs,” he said. “On the one hand, you’ve got the argument of it could make things simpler if they get it fully integrated. I’m a little bit unique because I was an MSSP before I went to the manufacturer side and I know for me it was if I could get everything at one place, of course that was the easy button for me. With Datto and Kaseya specifically, there’s two different platforms. I think a lot of MSPs here were probably using pieces of both. But I think the bigger question is we should probably talk to ConnectWise and see what they think. But this will definitely continue.”

Cybersecurity M&A Moving Fast

Trellix’s Kristi Houssiere

Kristi Houssiere is Trellix‘s senior director of global channel strategy and operations. She said the volume of cybersecurity M&A is moving so fast and “so often it’s inevitable.” Trellix resulted from STG acquiring McAfee Enterprise and FireEye, and then merging the two.

“We went around the room and every single one of us said oh, I was with so and so and then I got this one and then this one,” she said. “I think for our partners, it’s following the bouncing ball. I am sympathetic to our partners for them having to have the flexibility of a pretzel because we’re always changing. So but I think it’s inevitable.”

NTT’s Matt Lantinga

Matt Lantinga is NTT Application Security‘s vice president of sales and global strategic accounts.

“I think you have your serial entrepreneurs who are going to build these companies and they’re going to get bought,” he said. “And they’re going to do it over and over again. That’s what they do. They have great ideas and they build great technology. But their goal isn’t to stay in the business forever. They’ve got three more plans in their head.”

There’s also companies that buy their way into security, Lantinga said.

“They’re building platforms out there, not just a one-niche product like what they’re buying,” he said. “They’ve got a suite. They’ve got a vision of expansion. In the short term, in my experience, it has a little bit negative impact on the products when they initially buy them. But if they do it right, and some of these companies do a great job and they integrate it into a suite, it’s much better for the customer. So now they have that company that has a lot more offerings rather than the niche product. So I think over the long term, it is a benefit and it’s not going to stop because we’ve got entrepreneurs that know how to make a lot of money. They’ve got a lot of great ideas and they’re going to keep going.”

M&A Recognizes Value of Subscription Revenue

Sophos’ Scott Barlow

Scott Barlow is Sophos‘ vice president of global MSP and cloud alliances. Thoma Bravo acquired Sophos in 2020 for nearly $4 billion.

“I think the the platform play is partially what’s driving all of this,” he said. “Also, the recognition of the value of subscription revenue. With MSPs, it’s being valued much higher than just a traditional resale model. It has definitely accelerated. And with cybersecurity the way it is in the world today, I can see it maintaining this speed for awhile.”

Fortinet’s Jon Bove

Jon Bove is Fortinet’s vice president of channel sales.

“I think on one hand, if that’s the path that these companies are going, that’s how they’re maximizing shareholder value or the value of their own company,” he said. “And so I think with the market dynamics, it’s going to be interesting to see even the levels of initial public offerings (IPOs) versus private equity acquisitions. The common point around the table is platforms are needed to protect against the advanced cyber threats of today, and they view this consolidation as a path to get there. So it’s a good business model to help their customers and the partners.”