British company M86 Security has announced that it is buying Israeli network security company Finjan. Financial details were not disclosed, but it would appear that, at least initially, no cash will change hands, and the acquisition will be for a stake in the merged company. Industry sources estimate Finjan’s value in the deal at $30-40 million.
Finjan is a veteran company on the Israeli start-up scene, insofar as it is possible to call a thirteen-year-old company a start up. It has developed software for protection against viruses and security problems on the Internet. It was founded in 1996, but changed its business model several years ago to activity in the enterprise sector. Finjan’s solution, which acts as a virtual gateway to content from the Web, carries out real-time checks on content that the user accesses on the Internet. The company’s solutions are mainly directed at viruses, malware, and spyware.
Finjan has changed hands several times over the years. It was founded by Shlomo Touboul, who left the company in 1998 and was replaced by a professional CEO. However, in 2001 Touboul was recalled to rehabilitate the company which had failed to keep up with changing times. This time, Touboul remained for four years. He ws dimisssed in 2005, in a power struggle among the shareholders. In response to today’s announcement, Touboul said, “Finjan is a company rich in technology, and I hope its potential will be realized.”
Since Touboul left, the company has not had stable management. It is currently headed by Gadi Maier, the third CEO since 2005. One of those CEOs was John Vigouroux, who now heads M86. He served at Finjan for eighteen months until last April, which raises the supposition that the deal has been on the cards for some time. M86 operates in the same filed as Finjan, Secure Web Gateway, so that there is a high level of synergy between the two companies.
Finjan is M86’s second acquisition in the last six months, following the March 2009 acquisition of behavioral malware detection company Avinti, Inc. The acquisition grows M86 Security’s employee base to just more than 300 employees.
“We are very pleased to add Finjan’s technology, products, customers and employees to the M86 team,” said Vigouroux. “With M86’s complementary Email security and reporting products and worldwide distribution, we anticipate a broad opportunity for Finjan’s enterprise-class Web security solutions to existing and new customers.”
”There’s an opportunity here to build a company with enough mass to compete with the big guys,” said Michael Eisenberg, a partner at the Benchmark venture capital firm, one of Finjan’s veteran investors. Over the years, several funds have invested in the company, among them HarbourVest, Israel Seed, company chairman Eric Benhamou’s BGV, alongside Cisco and Microsoft as strategic investors. In total, Finjan raised some $80 million, and it may still have cash left from its most recent round, at the end of 2008, when it raised $22 million
The acquisition terms include a rare clause: Finjan’s intellectual property remains with the original shareholders, which is one thing that makes estimating the value for the purposes of the acquisition difficult. The reason for the unusual provision is Finjan’s successful lawsuit against McAfee over patent infringement. Finjan is due to receive tens of millions of dollars in damages, which will go to the existing shareholders. Eisenberg said today that “Finjan will insist on its rights to maximize the value of its IP,” implying perhaps that the shareholders will make further use of the company’s patents.
Published by Globes [online], Israel business news - www.globes-online.com - on November 3, 2009
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