Vista Equity Reportedly Seeks Buyer after Moving Websense to Texas
[Updated 3/17/15 10:40 am. See below.] Vista Equity Partners, the private equity firm that acquired San Diego’s Websense in 2013 and moved 445 jobs to Austin, TX, has hired Citigroup to assist in the company’s sale, according to a recent Bloomberg News report.
Websense spoksman Charles Saunders declined comment, writing in an e-mail this morning, “It is our policy not to comment on market rumors or speculation.”
[Updated with Websense reportedly in buyout talks with Raytheon.] More recently, Bloomberg News reports that Raytheon (NYSE: RTN), the Waltham, MA-based defense contractor, is in talks with Vista to acquire Websense. Raytheon’s core business is in aerospace and weapons manufacturing, and in defense and commercial electronics. The company ranks as the world’s biggest maker of guided missiles. However, Raytheon also has a major business in intelligence and information services in Dulles, VA, and Raytheon acquired Blackbird Technologies, a surveillance and cybersecurity company, for $420 million in November.
Websense specializes in Internet gateway security technology for corporations, government agencies, and other big customers. In January, the company introduced the latest version of its Triton cybersecurity technology for preventing data theft and protecting systems and devices.
Former Texas Gov. Rick Perry helped lure Websense to Austin by pledging to provide $4.5 million in cash to the company as a relocation incentive, according to the website for the Texas Enterprise Fund. The city of Austin offered the company another $438,000 in incentives. Websense, in turn, agreed to spend $9.9 million in capital improvements related to its new headquarters. Like other companies receiving grants from the fund, Texas says Websense is contractually obligated to create a specified number of jobs in Texas (in this case, 445).
Vista’s move to sell Websense, however, comes at a curious time. The cybersecurity company has not had even a full year to settle into its new Austin headquarters.
A spokesman for Texas Gov. Greg Abbott, who was elected in November, did not respond to a request for comment sent Friday by Xconomy.
There also was no response to a query sent Friday to Vista Equity Partners, which paid close to $900 million to get Websense.
“PE [private equity] firms will often try to exit as soon as they see their investment thesis may have been incorrect so as to reduce potential losses,” said Jeb Spencer, founding partner of San Diego-based TVC Capital. “If they paid a good price up front, then exiting earlier than expected can at least ensure the firm gets its money back given the core assets.”
TVC has invested over $7 million in EdgeWave, a rival San Diego cybersecurity company, and Spencer added, “Given how hot the security space is and the fact that they paid a reasonable price, I suspect an acceptable exit is achievable.” The average security-focused software firm, he pointed out, has exited for 10 times its revenue over the last four years.
The move to Austin disrupted Websense’s business, and their sales partners and customers are “upset,” according to Paul Martini, co-founder and CEO of iboss Network Security, a San Diego-based rival. He noted that news of Vista’s decision to seek a buyer for Websense broke soon after the Sunnyvale, CA-based enterprise security company Blue Coat Systems announced that it had agreed to a cash buyout offer from Bain Capital valued at $2.4 billion.
As Xconomy reported last year, iboss pulled back from a planned move to Austin, TX, at the end of 2013 after learning that Vista planned to move Websense there. Since then, Martini said iboss has grown to about 150 employees, which includes some choice hires from Websense. The company also purchased a Campus Point building near University City that previously housed SAIC’s data center, and plans to move in August after renovations are completed.
In addition to buying Websense in 2013, Vista Equity Partners also acquired two other San Diego companies, paying Qualcomm about $800 million for the fleet-tracking company Omnitracs, and about $1 billion for the Active Network, which provides Web-based online events registration. Both companies moved to Dallas, TX. The Texas Enterprise Fund provided $3.9 million to lure Omnitracs and $8.6 million for the Active Network.