martinwolf Transaction Analysis

Financial Information

• Transaction Size of Websense Acquisition: $1.9 Billion
• EV/LTM Revenue: >4 – 5x
• Enterprise Value of New Joint Venture: $2.3 Billion

Transaction Facts

• US defense contractor Raytheon Co. (NYSE:RTN) announced today that it is acquiring network security provider Websense Inc. and combining its offerings with that of Raytheon Cyber Products to establish a new cybersecurity joint venture.
• Websense has been a portfolio company of Vista Equity Partners since 2013, and Vista will continue the relationship by investing approximately $335 million for a 19.7 percent equity stake in the new joint venture post-acquisition.
• The joint venture will have an enterprise value of approximately $2.3 billion, consisting of the $1.9 billion in cash Raytheon is spending to acquire Websense combined with the assets of Raytheon Cyber Products valued at $400 million that Raytheon is contributing to the new company.

Cybersecurity Extends Its Run in the Spotlight

• The Big Deal: As the largest acquisition in a decade by one of the nation’s top defense contractors, this deal is a major milestone for the defense industry. Raytheon has been especially active in pursuing the cybersecurity space, having made 14 acquisitions since 2007. The company most recently acquired Blackbird Technologies last November for $420 million.
• For Vista, the Gift that Keeps On Giving: In purchasing its stake in the new joint venture, Vista Equity Partners will be able to continue to benefit from its original $1 billion acquisition of Websense in May 2013. Vista, which has been very active in the security and software spaces, will enjoy both a great return and ongoing profits.
• For Raytheon, Risk and Reward: The acquisition of Websense and its 21,000 clients represents a massive push into the commercial cybersecurity space, which some analysts have cautioned takes Raytheon outside of its government focus area and carries with it some risk. But the commercial space has a growing need for cybersecurity solutions, and Raytheon is expecting to capitalize on it.
• Security Remains Hot Target: This is only the latest of several recent large cybersecurity acquisitions. In December we saw British defense contractor BAE Systems (LSE:BA) acquire SilverSky in a similar transaction, preceded by Blackstone’s acquisition of Accuvant in February 2014 and subsequent merger with FishNet Security in September.