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Potential Buyers for Imperva Security Business

Imperva Inc., the underperforming cybersecurity company, has apparently attracted takeover interest. In response, Imperva has hired Qatalyst Partners to potentially line up official bids for the company, Bloomberg reports.

At first glance, the IT security market is a hot sector that should attract plenty of suitors. But Imperva and many other security companies have been struggling or underperforming in recent quarters.

Among the examples: Symantec recently announced plans to acquire Blue Coat — though the deal will essentially puts Blue Coat executives in charge of the merged company because Symantec was struggling on its own. Meanwhile, Intel apparently is mulling the potential sale of its McAfee security business — which made some missteps in the SaaS security channel in 2015.

Imperva Revenue Weakness

As for Imperva, business has been unexpectedly weak. Based on preliminary financial information, Imperva currently expects to report total revenue for the second quarter of 2016 in the range of $57.5 million to $58.0 million. That’s significantly below the company’s prior guidance of $65.5 million to $66.5 million, the company conceded this week.

During a briefing with Wall Street analysts on July 11, Imperva CEO Anthony Bettencourt said the revenue weakness did not involve competitive issues. But he declined to get too specific about the shortfall. He also declined to discuss the alleged “strategic process,” which may or may not involve a company sale. Imperva plans to report full financial results for the quarter after the close of the market on August 4, 2016.

Bettencourt promised to answer more questions at that time.

Potential Imperva Buyers

Meanwhile, speculation about potential buyers has surfaced. Cisco Systems (CSCO), IBM (IBM) or Symantec (SYMC) could make a play for Imperva, RBC analyst Matthew Hedberg told Investors Business Daily this week.

I respectfully disagree with the speculation. Here’s why: Cisco and IBM typically acquire fast-growth businesses rather than companies that need fine-tuning or fixes to their business models. Also, Symantec has its hands full with the Blue Coat deal.

Imperva’s valuation, currently $1.5 billion, suggests to me that private equity firms will emerge as the primary suitors for the company. After all, PE firms like growing companies in hot markets that need business model adjustments. Imperva’s business seems to fit that description pretty darn well right now.

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