Zimperium acquired by Liberty Strategic Capital for $525M

Liberty Strategic Capital this week agreed to acquire mobile security vendor Zimperium, marking the latest cybersecurity investment by a private equity firm.

Headed by former Treasury Secretary Steven Mnuchin, Liberty Strategic Capital made its first controlling stake purchase with the Zimperium acquisition, which was announced Tuesday. With a $525 million price tag, it's the largest cybersecurity investment yet for Mnuchin's firm. Over the past year, Mnuchin and Liberty have spent more than $1 billion on cybersecurity acquisitions, following a trend of private equity funds investing heavily in the industry.

While it is not yet clear what the next steps will be, Zimperium CEO Shridhar Mittal told SearchSecurity that it "has discussed pursuing an initial public offering in the future."

Doug Cahill, a senior analyst at Enterprise Strategy Group, a division of TechTarget, said the decision for a company to sell to private equity firms instead of going public involves many factors.

"To me, [selling to private equity firms] is an attractive liquidity event for the major stakeholders. Once you go public, you're under the scrutiny of the public markets," Cahill said. "While an IPO seems glamorous and it seems attractive as an exit as a liquidity event, it's also laborious to be living on a quarterly cadence of earnings to Wall Street. For some new organizations, their major shareholders prefer a liquidity event of getting acquired by a private equity firm, and some of them see the opportunity for a double dip. They can have an initial liquidity event by getting acquired by a private equity fund, and very often PE firms will optimize the balance sheet of the company and then grow it and then spit it back out via an IPO or they might do a roll up where they acquire multiple companies and then bring that new entity to the public markets."

Zimperium is not the only cybersecurity investment that Liberty Strategic Capital has made. The firm has stakes in three other companies in the field -- BlueVoyant, Cybereason and Contrast Security -- in which it invested $250, $275 and $110 million, respectively, over the past year.

In a statement to SearchSecurity, Mnuchin explained why his firm is interested in cybersecurity acquisitions. He founded the firm in 2021.

"Given our team's national security and cybersecurity experience, we are keenly focused on partnering with innovators at the forefront of protecting against the serious and evolving cyber threats faced by individuals, businesses and governments around the world," Mnuchin said. "We believe that Zimperium has positioned itself as a leader in securing mobile endpoints and applications, and we look forward to working with them as they aim to strengthen mobile security worldwide."

Liberty Strategic Capital is far from the only private equity firm to put substantial money into the world of cybersecurity. Over the past few years, firms have shown a willingness to acquire both minority and majority stakes in all kinds of companies dealing with cybersecurity.

Cahill also discussed what has led to this movement.

"I think it's indicative of a couple of trends in the market," Cahill said. "One is cybersecurity continues to be the No. 1 area of incremental IT spending because risk remains high, with motivated adversaries and more complicated attack surfaces as well as compliance. There's a lot of business drivers around why cyber security spending goes up. Second thing is, buyers directionally want to buy more solutions from fewer vendors so there's a theme of convergence, and convergence is an indicator of market maturation. That is leading to a series of platforms that organizations are now consolidating to, and those market trends all lead to your vendor perspective and the need to operationalize their go-to market model, they become more operationally efficient. That is in the wheelhouse of a private equity company's business model, which is either margin- or profit-focused."

One of the largest acquisitions of a cybersecurity company came at the end of 2021, when a group of investors -- including private equity firms Advent and Crosspoint Capital -- agreed to purchase McAfee's consumer security business for more than $14 billion. This sale follows another McAfee transaction from March 2021, when the company sold its enterprise security business to another private equity firm, Symphony Technology Group, for $4 billion.

In addition to McAfee, Advent in the last year has invested in companies including Cyware, Wiz and Salt Security, all focusing on different aspects of the cybersecurity industry.

Other private equity firms have made major investments in cybersecurity companies recently. On March 4, Hellman & Friedman Capital Partners X purchased a 7.5% stake in Splunk for $1.4 billion.

Prior to investing in Splunk, Hellman & Friedman acquired application security vendor Checkmarx for $1.15 billion in 2020.