Thursday, September 28 2023

Thales announced that it has reached an agreement with software investment firm Thoma Bravo to acquire 100% of Imperva, a leading US-based data and application cybersecurity company, for an enterprise value of $3.6 billion.

With this acquisition, Thales is taking its cybersecurity business to the next level. Imperva will enable growth in data security and Thales’ entry into the attractive application security market. Thales’ total cybersecurity business will generate more than € 2.4 billion in revenues. The transaction price is based on a $3.6 billion enterprise value. Significant value creation for Thales shareholders can be attributed to the $110 million of run-rate cost and revenue synergies, the financial profile of their DIS segment being enhanced, the significance of medium-term adjusted EPS accretion, and the transaction adjusted ROCE3 above WACC in Year 5 post-closing.

Imperva’s integration into Thales will significantly expand Thales’ addressable market in an already fast-growing sector. The new financial targets set for Thales’ Digital Identity and Security (DIS) activity are 2024-2027 organic sales growth: +6 to +7% and 2027 EBIT margin to reach 16.5%.

The acquisition is in line with Thales’ disciplined capital deployment framework, with no impact on the Group’s existing dividend policy or ongoing share buy-back program. Additionally, the transaction’s closing is expected by the beginning of 2024 upon completion of customary antitrust and regulatory approvals.

Leading figures at Thales, Imperva, and Thomas Bravo expressed their support for the acquisition. Thales chairman and chief executive officer Patrice Caine said, “The acquisition of Imperva marks a major milestone in Thales’ cybersecurity strategy. With this acquisition, we are seizing a unique opportunity to accelerate our cybersecurity capabilities and are taking an important step towards our ambition to build a world-class global cybersecurity integrated player, providing a comprehensive portfolio of products and services. We have tremendous respect for Imperva’s innovative application and data security offerings. Imperva and Thales share the same vision and the same DNA. We are thrilled to enter the next phase of our growth together. We look forward to welcoming Imperva to Thales to further enhance our cybersecurity solutions, and help customers address their most important digital security challenges.”

Thoma Bravo managing partner Seth Boro stated, “Imperva is a leading force in cybersecurity with an impressive track record of providing cutting edge security solutions and protecting customers through all stages of their digital transformation, from the application level down to the data level. Over the course of our more than four years of partnership, Imperva further differentiated itself in the competitive cybersecurity market through accelerated growth and innovation and with its unique approach to end-to-end application and data security. During this time, the company successfully executed three acquisitions which strengthened its product offerings and capabilities to better protect clients’ critical data and applications. We are proud of what we built through our partnership with Pam Murphy and the Imperva team, and look forward to watching the company’s continued success as part of Thales’ innovative and diverse security portfolio.”

This can be attributed to Imperva’s impressive track record. Headquartered in San Mateo, California, the company has a highly recurring revenue business model and a large and diversified customer base. It serves approximately 35% of Fortune 100 companies and some of the largest groups in financial services, telecommunications, energy, healthcare, retail, and e-commerce. Additionally, Imperva is 9-time awarded in the Gartner Magic Quadrant for Web Application Firewalls and API Protection (WAAP) and a Gartner Peer Insights Customers’ choice in 2023. Imperva also demonstrates an attractive financial profile, with double-digit sales growth and ~20% EBIT margin forecasted by 2027, in line with Thales’ global cybersecurity product business.

With this acquisition, Thales will add circa $500 million of revenue and significantly expand its data and application security offering. The combination of Thales and Imperva’s operations will create a world-class global cybersecurity portfolio structured around 3 product areas: Identity (Thales), Data security (Thales and Imperva), and Application security (Imperva).

Thales and Imperva will combine their respective strengths. Increased capabilities are notably expected in protecting data at rest and in use, complementing Thales’ know-how in data in motion.

Imperva and Thales will also benefit from their strong complementarity and cultural fit in terms of clients and addressable markets. The combination is expected to yield significant commercial opportunities within the existing client base and revenue synergies in the years ahead.

Thales estimates that the combination will generate c.$110 million of pre-tax run-rate synergies, including $50 million of cost synergies and $60 million linked to revenue synergies.

In its growth context and subject to forthcoming social processes, Thales plans to regroup, as of January 1st, 2024, all its civil cyber activities (currently split between its Digital Identity & Security (DIS) and Defense & Security operating segments) within DIS. This will further strengthen DIS’ position as a go-to player for civil cybersecurity products and solutions and facilitate the capture of synergies within the full portfolio.

Following the acquisitions of Imperva and Tesserent, global cybersecurity products and services will represent 44% of Thales Digital Identity & Security segment sales in 2024, addressing a $36 Billion Total Addressable Market, representing a 60% increase compared to the previous situation.

This acquisition allows the Group to set new financial targets for DIS. Over the 2024-2027 period, DIS sales are now expected to grow annually by 6-7% on an organic basis to reach a level of sales between €5.4 to €5.5 billion in 2027. Its EBIT margin should reach 16.5% by the same horizon.

Given Imperva’s very attractive business model, the transaction will be immediately accretive to Thales’ growth and margin profile. The acquisition price represents a 6.1x 2024 EV / revenue multiple, in line with precedent transactions and trading multiples of cybersecurity peers with similar profitable financial profiles. It corresponds to an implied 17x 2024 EBIT multiple post-run-rate synergies and a 13x 2027 EBIT multiple post-run-rate synergies.

Following the transaction, Thales expects to maintain its solid investment grade profile, with a pro forma 2024 leverage ratio of ~0.7x, in line with the Group’s disciplined capital deployment strategy. Thales confirms its attractive capital allocation policy with a target dividend pay-out ratio of 40%, in line with previous years, and the continuation of its ongoing share buy-back program.

The transaction’s closing is expected by the beginning of 2024, subject to the completion of customary antitrust and regulatory approvals.


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