Sophos Sells Majority Stake to Apax to Fuel Growth

Sophos, a Burlington, MA-based maker of IT security software and hardware, announced its plans to sell a majority stake to private equity firm Apax Partners. The transaction values Sophos at $830 million, and will leave the company founders remaining as significant minority stakeholders in the company.

Sophos had been exploring different avenues for entering a growth phase, said the company’s VP of corporate strategy Arabella Hallawell. “Apax found us and we got to know them and found that we had very similar visions,” she said in a call with Xconomy. The deal will put Apax’s stake in Sophos around 70 percent, she said. TA Associates, which has been a Sophos stakeholder since 2002, will sell its full share in the company to Apax as part of the deal.

Sophos security products include anti-virus, anti-spyware, firewall, network-access- control, disk-encryption, and data-leak-prevention systems. It has more than 100 million users that span 150 countries, and include Cisco, Heinz, Marks and Spencer, and Harvard University.

Apax, which focuses heavily on investments in the technology and telecommunication sector, manages about $40 billion in funds. “We identified the security software space as an attractive investment area for us given its rapid growth driven by ever increasing malware threats and high barriers to entry. Sophos is a very strong platform and is gaining market share,” Apax partner Salim Nathoo said in the company announcement of the deal.

Sophos aims to reduce the complexity behind security software for its customers. The company’s potential avenues for future growth include expanding to different geographies and markets such as healthcare, developing the technology to accommodate IT innovation and disruption from models such as virtualization and software-as-a-service, or entering new, related security software areas through acquisitions or new products, Hallawell said.

We wrote about Sophos in July 2008 when the company announced plans to buy Utimaco Sofware, a German maker of encryption and security software, for $340 million in cash. Hallawell called the acquisition “fortuitous,” as companies have increasingly demanded encryption products in order to meet with new compliance standards.

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