One Identity LLC, a key element in Quest Software’s 2012 blockbuster sale to Dell Inc., which made Vinny Smith a billionaire, has closed its first acquisition as a stand-alone company.
The deal for Balabit Corp. comes about seven months after the Aliso Viejo-based business software maker was spun out as an independent entity under the same ownership of San Francisco-based private equity firm Francisco Partners and Evergreen Coast Capital, a Silicon Valley unit of noted activist investor Elliott Management in New York.
Dell, which acquired Quest for $2.8 billion during a diversification effort, sold the company and its software division on undisclosed terms to the investor team in November 2016, a few weeks after closing a $60 billion takeover of data center builder and storage systems provider EMC Corp. in the biggest deal in tech history.
That benchmark will be shattered if Broadcom Ltd. can wrestle away San Diego-based rival Qualcomm Corp., which late last year voted down an unsolicited $103 billion bid from the Singapore-based chipmaker.
The Balabit deal adds 200 workers to One Identity’s global employment, as well as security and access technology, according to Jackson Shaw, vice president of product management.
“The acquisition of Balabit helps us round out our position and strengthen our portfolio,” he said.
One Identity has been making investments for years in what’s called “privileged access management services,” or applications that allow companies to secure, control and audit privileged accounts and critical systems overseen by administrators, with the overarching goal of reducing the risk of data breaches.
“It allows a company to really control their keys to the kingdom,” Shaw said.
The kingdom that software firms like One Identity and Balabit aim to protect is company networks.
Industry trade publications rate One Identity and Budapest, Hungary-based Balabit among the top dozen firms globally in the growing area of cybersecurity, known as PAM.
Neither of the two software firms nor their financial advisers disclosed details of the deal. Balabit was founded in 2000 for a reported 5 million HUF—equal to $20,000 today. It received an $8 million Series A investment from London-based venture fund C5 Capital in 2014 to “speed up the development and expansion of its pioneering IT security platforms,” the firm said at the time.
One Identity specializes in identity and access management software used by more than 7,500 global customers, including Nike, Visa, Uber, Texas A&M University, Barclays Bank, Hyundai, Prudential, Citigroup and the state of New York.
The segment is forecast to grow at a 13% compounded annual rate through 2021, when sales and services would approach $15 billion, according to research firm MarketsandMarkets.
One Identity posts annual revenue of about $250 million. It closed the books on 2016 with its 13th straight year of profitability. It employs about 600 globally but doesn’t break down local employment.
C5’s website says One Identity’s buy of Balabit marks the IT and data security fund’s first sale or exit—and that the Budapest firm has “a strong foothold in the U.S. market,” with sales doubled since the C5 investment in the summer of 2014. Some European trades pegged Balabit’s annual sales in the range of $20 million to $25 million.
Questory
Following the Dell Software sale, the division became part of a newly formed Quest Software, which is led by John Milburn, who reports to Jeff Hawn, chairman and chief executive of Quest and One Identity.
Quest was Orange County’s third-largest software maker last year, with an estimated 600 local workers in Aliso Viejo.
It employs about 3,500 globally and provides several office, human resources and administrative functions for its portfolio of businesses.
Dell Software was established in 2012 after Round Rock, Texas-based Dell acquired Quest. The sale propelled Chief Executive Smith into the billionaire club and provided a foundation for Dell to diversify offerings beyond PCs.
The foundation of One Identity grew under Smith’s watch and acquisitive nature—he rolled up more than 70 companies and investments at Quest since he took the role of chairman and chief executive in 1997.
Quest became a prime takeover target as numerous technology companies searched for an entree into the lucrative enterprise software market.
In late 2012 Smith used some of the Quest sale proceeds to establish Newport Beach-based Toba Capital, now OC’s largest venture firm, with an $800 million evergreen fund and more than 40 investments.
