IT Security Meets eDiscovery
IT security giant Symantec recently acquired an eDiscovery provider, Clearwell Systems, for $390M ($345 in cash / $45 in stock). This transaction marks the continued demand for information governance and the start of a convergence between IT security and data forensics markets. As network topology grows with additional interconnections among various IT elements, the set of multi-disciplinary structures, policies, and controls implemented to handle information for all digital artifacts will become unmanageable by organizations without sufficient tools or solutions.
This is also a challenge being faced by security vendors. As IT security continues evolving into an integral part of the ecosystem, eDiscovery’s ability to grant visibility into the network and identify critical assets will become a key component to ensuring security. In fact, 2011 has seen other noteworthy eDiscovery transactions, including Autonomy buying key assets of Iron Mountain’s digital division and EPIQ Systems buying Encore Discovery Solutions.
However, Symantec’s decision to pay nearly 7.0x trailing revenue for Clearwell (when similar recent deals have priced between 3.0x and 5.0x) is a strong indicator of growing interest for leading firms in the space, making a convergence of data forensics and security increasingly likely. Moreover, Clearwell adds a more robust eDiscovery module than Symantec’s existing solution, Enterprise Vault, thus providing a significant cross-selling opportunity with its installed base of over 14,000 customers, as well as various other product lines such as NetBackup, DLP, and Data Insight. Given the demand generated by targets in the space, it will be interesting to track what Symantec’s competitors do in response to this transaction.
Additionally, this deal provides some key takeaways with regard to the eDiscovery and information security markets, including:
- Emerging importance of eDiscovery solutions to enhance data archiving requirements and tackle “big data” theme prevalent throughout the security industry
- Diverse set of buyers are considering the push into this consolidating market, leaving targets a limited time frame for which to pursue a sale process capable of generating outsized returns
- Customer variety creates a tangible benefit for an acquiring business to derive value; the minimal overlap of existing customers created a compelling opportunity for Symantec to expand its solutions