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Sophos takes on new investors May 4, 2010

Posted by jonathanpenn in client security, news.
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On the heels of Symantec’s two encryption acquisitions,  there’s another development in the client security space. Sophos’ original investors just sold their stake. Sophos’ new investors, Apax Partners, invested $400m and acquired a majority stake – thus valuing Sophos at just over $800m.

Sometimes, these investments serve as a lifeline for a vendor (e.g., private equity firm Thoma Bravo’s acquisition of Entrust a year ago). That is not the case here. Sophos was a healthy and growing company – though it faces increasingly stiff competition from the top-tier client security companies.

This is not just a buyout of early investors, but an additional investment in Sophos. So this will ultimately help Sophos by fueling acquisitions as well as global expansion.

There are several possible dynamics going on here. It could be that Sophos investors saw a good opportunity to pull out. In fact, those investors (TA Associates), were also the ones who invested $200m in AVG recently. So it could also simply be that TA didn’t want to have two AV vendors in its portfolio and decided to rationalize, especially since these two vendors have very different strategies and business models. Sophos was also purportedly on the IPO track – with estimates placing the valuation at ~ $1b. It could also be that Sophos saw that, for whatever reason, the IPO route wasn’t optimal.

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