20 Dec F5 to Acquire Shape Security, Transforming Application Security
SEATTLE & SANTA CLARA, Calif.–(BUSINESS WIRE)–F5 Networks, Inc. (NASDAQ: FFIV) and Shape Security today announced a definitive agreement under which F5 will acquire all issued and outstanding shares of the privately held Shape for a total enterprise value of approximately $1 billion in cash, subject to certain adjustments.
Shape protects the largest banks, airlines, retailers, and government agencies with sophisticated bot, fraud, and abuse defense. In particular, Shape defends against credential stuffing attacks, where cybercriminals use stolen passwords from third-party data breaches to take over other online accounts. Shape has built an advanced platform, utilizing artificial intelligence and machine learning, supported by powerful cloud-based analytics to protect against attacks that bypass other security and fraud controls.
This acquisition brings together F5’s expertise in protecting applications across multi-cloud environments with Shape’s fraud and abuse prevention capabilities to transform application security. Together F5 and Shape offer organizations comprehensive, end-to-end application security, potentially saving billions of dollars lost to fraud, reputational damage, and costly disruptions to critical online services.
Shape’s application protection platform evaluates the data flow from the user into the application and leverages highly sophisticated cloud-based analytics to discern good traffic from bad. With F5’s location in the data flow of traffic in over 80% of Fortune 500 application infrastructures, F5 provides the ideal insertion point for Shape’s security services. Together F5 and Shape will dramatically reduce the time and resources needed for organizations to deploy world-class online fraud and abuse protection.
“We know from the companies we work with that applications are critical to running their business. To drive maximum business value and the best experiences for their customers, these apps need to perform flawlessly while protecting data security and user privacy. When a website or application experience is degraded by web fraud and abuse, the result is lost revenue, lost brand equity, and customers jumping ship to the competition,” said F5 President and CEO, François Locoh-Donou.
“With Shape, we will deliver end-to-end application protection, which means revenue generating, brand-anchoring applications are protected from the point at which they are created through to the point where consumers interact with them—from code to customer,” continued Locoh-Donou. “Beyond opening a fast-growing $4 billion adjacent market, Shape’s machine learning and AI-powered capabilities will scale and extend F5’s broad portfolio of application services and expand our ability to optimize and protect customers’ applications in an increasingly complex multi-cloud world.”
“Since Shape’s inception, we observed a consistent pattern in customer after customer: the use of F5 technology to deliver and enable their applications,” said Derek Smith, co-founder and CEO of Shape. “Now, we look forward to the opportunity to deeply integrate into F5’s platform for application delivery and security—F5 provides the optimum traffic flow insertion point for Shape’s industry-leading online fraud and abuse prevention solutions. This, combined with F5’s global go-to-market scale, means we can jointly protect significantly more customers’ applications and users from sophisticated attacks and malicious traffic.”
Upon closing of the acquisition, Derek Smith, and the leadership team will join F5 in key management roles. Shape will remain located in their current Santa Clara headquarters.
The acquisition of Shape is consistent with F5’s vision to build the best end-to-end multi-cloud application services company. It accelerates F5’s product and total revenue growth; speeds F5’s transition to a software- and SaaS-driven business model; and is expected to meaningfully increase F5’s software subscription mix in fiscal year 2020.
F5 expects to achieve breakeven non-GAAP EPS within 24 months of closing the acquisition and anticipates that the combination will be accretive to free cash flow per share within 12 months of closing. F5 expects to fund the transaction through cash on its balance sheet and $400 million in a Senior Unsecured Term Loan A.
The acquisition has been approved by the boards of directors of both F5 and Shape. The acquisition is subject to regulatory approvals and other customary closing conditions. The transaction is expected to close in the first calendar quarter of 2020.
Foros and JP Morgan acted as financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP provided legal counsel to F5 on this transaction. Qatalyst Partners acted as financial advisor and Sidley Austin LLP provided legal counsel to Shape.