Sumit Dhawan, CEO of Proofpoint, took the reins as head of the cybersecurity company in 2022, a year after it was acquired by Thoma Bravo for $12.3 billion. It is pushing the company to consider strategic opportunities, such as mergers and acquisitions of smaller cybersecurity players, to spur the company’s market expansion and spur industry consolidation.
Evidence
LONDON — Private cybersecurity firm Proofpoint is exploring tapping outside investors for pre-IPO funding and possible M&A of smaller cyber companies as it seeks a return to the public markets in 2026, CEO Sumit Dhawan told CNBC.
“We’re looking to explore potential public markets sometime in the next 12 to 18 months,” said Dhawan, who took over as Proofpoint’s new chief in November 2023, two years after the company was acquired by private equity firm Thoma Bravo. .
Dhawan added that the timing of Proofpoint’s IPO will still depend on general market conditions as well as the outcome of the 2024 US presidential election.
Since Thoma Bravo’s 2021 acquisition of Proofpoint and Dhawan’s subsequent appointment as CEO, the company’s management has been pushing the company to look at strategic opportunities such as mergers and acquisitions of smaller cybersecurity companies to drive industry consolidation.
Noting that there are currently too many players in the cybersecurity market, Dhawan said Proofpoint is looking for acquisition targets that offer “strategic fit” for the company — at the right price.
“It’s happened in a lot of other technology spaces — it’s happened with infrastructure, it’s happened in the application platform space — where you start building fewer providers but richer platforms, and as a result there will be consolidation,” Dhawan told CNBC in an exclusive interview. interview this week.
“There are, right now, about 2,000 not-for-profit venture-backed cybersecurity companies, so it’s clear that they’re either going to consolidate or potentially not exist. Because there’s no way any market has that many players. So it’s going to happen, that’s for sure that will happen.”
Dhawan said he finds that there is a bit of a bid-ask spread in the market right now when it comes to cybersecurity opportunities, meaning target companies are asking for more money in the sale price than the valuations they are being offered. But he added that he sees some “big opportunities” in the market.
A key priority for Proofpoint as it pursues M&A targets is geographic expansion, Dhawan noted, adding that the company sees big growth opportunities in non-English-speaking countries such as Japan, South Korea and the Middle East, where cyber breaches are skyrocketing due to the rise of genetic artificial intelligence.
The number of business email compromise attacks increased by 35% in Japan, 31% in South Korea and 29% in the United Arab Emirates, according to data Proofpoint shared with CNBC. That’s because genetic AI makes it easy for hackers to personalize emails in multiple languages, according to Dhawan.
The road from private to public
Founded in 2002 in Silicon Valley, Proofpoint builds technology that helps companies prevent phishing attempts and other cyberattacks across a range of platforms, including email, social media, mobile and the cloud.
The company competes with the likes of Palo Alto Networks, CrowdStrike and Fortinet, all three of which have seen their shares rise sharply over the past 12 months. CrowdStrike — the company that caused a global IT outage this year due to a software problem — up 65% year-over-year.
Shares of Palo Alto Networks and Fortinet rose 44% and 32%, respectively, over the same period.
Proofpoint went public in the US in 2012 but was subsequently delisted after Thoma Bravo acquired the company in a $12.3 billion deal in 2021. The acquisition followed investor concerns about slowing revenue growth.
Now, Proofpoint is once again trying to tap into public markets.
“We’re a little bit different from the typical companies that go for an IPO,” Dhawan said. “They tend to be smaller. They tend to have a very different profile. They tend to have uncertainty about profitability and they tend not to be able to consolidate easily.”
Proofpoint going public wouldn’t mark the first time a company acquired by Thoma Bravo in a private equity buyout has gone IPO for a second time. In 2019, cybersecurity firm Dynatrace, which Thoma Bravo took private in a 2014 acquisition, re-listed in an IPO in New York.
Proofpoint could go through “multiple rounds” of financing to expand the company’s ownership from other private equity investors, Dhawan told CNBC, adding that private placements — sales of shares to pre-selected investors as opposed to general sales to the public – is among the options he is considering.
“We are close to starting the process” of raising capital from investors beyond its private equity owners, Dhawan said. However, he stressed that the company has not officially started this process.
Proofpoint’s boss said he hopes what separates his company from other tech and cybersecurity companies seeking a similar IPO route is a good balance of growth and profitability, double-digit growth and strong market leadership.
