July 24, 2018 / 4:02 AM / 3 months ago

Elliott-backed Gigamon to acquire cybersecurity startup

July 24 (Reuters) - Gigamon Inc, the U.S. networking software company that hedge fund Elliott Management Corp took private together with Qatar Investment Authority in December for $1.6 billion, is now making an acquisition of its own.

The company has agreed to buy a cybersecurity startup called ICEBRG, Gigamon Chief Executive Paul Hooper told Reuters in an interview.

The terms of the deal were not disclosed, though sources familiar with the matter said it values the Seattle-based startup at roughly $100 million.

ICEBRG was founded in 2014 by Will Peteroy and Josh Carlson, who had worked at the U.S. Department of Defense, the National Security Agency and Microsoft Corp. ICEBRG helps detect and respond to severe threats in corporate and government networks by using analytics to track sensors it installs.

Under Elliott’s ownership, Gigamon has been shifting its business to boost its recurring revenue based on subscriptions. Gigamon’s hardware devices help play traffic cop in virtual networks, monitoring traffic and then moving it to various applications.

Hooper said that the ICEBRG deal gives Gigamon more expertise in cybersecurity and “takes it more into the world of subscription software.”

Many companies are seeking acquisitions to expand their cybersecurity offerings. Earlier this month, telecommunications firm AT&T Inc bought AlienVault, a cybersecurity provider for small and medium-size businesses, while Cisco Systems Inc and International Business Machines Corp have been buying cybersecurity companies in recent years.

While the ICEBRG deal is a small acquisition and the first for Gigamon, it marks the start of a new M&A strategy for the Santa Clara, California-based company, Hooper said.

“There will be more acquisitions. The valuations in security are starting to get more realistic,” Hooper said.

Gigamon is considering pursuing deals of all sizes, including moving into other security areas and buying public companies that are bigger than it, according to a source familiar with the thinking of Elliott’s private equity arm, Evergreen Coast Capital.

Elliott, which has $35 billion in assets, sometimes uses Evergreen to pressure companies to explore a sale. Elliott used the strategy on LifeLock, which was later sold to Symantec Corp.

Momentum Cyber, a boutique advisory firm which has former FireEye CEO Dave DeWalt as its chairman, advised ICEBRG. (Reporting by Liana B. Baker in New York Editing by Phil Berlowitz)

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