Perimeter gets $50M injection
by Cheryl Meyer Posted 02:40 EST, 31, Jul 2007
Goldman Sachs Group Inc.'s private equity arm has invested $50 million in Perimeter eSecurity Inc., a provider of online software used to protect corporate computer networks.
The investment, announced Tuesday, July 31, is the first outside round of funding for Milford, Conn.-based Perimeter. Goldman's Principal Investment Area, as the New York investment bank's buyout unit is called, is now a "significant" minority investor in Perimeter, said company CEO Brad Miller, who declined to disclose the size of the stake.
In an interview, Miller said Perimeter sought the funding to provide liquidity for existing investors and to raise capital to help grow the company. Shareholders sold 30% of their stock to Goldman in this round of funding. Perimeter expects to seek "potentially significant" follow-on investments to fund acquisitions, he said.
Perimeter originally approached Goldman for help in raising funding from other lenders. Instead, Goldman's banking group referred them to the firm's private equity arm.
Perimeter previously raised a total of $4.5 million from angel, venture capital, private equity and strategic investors, including Astri Group, Cisco Systems Inc., Connecticut Innovations, 1to1 Venture Partners, Total Technology Ventures LLC and Trident Ventures LP. The company has been profitable since late 2001, Miller said. Since then, the company has made nine small acquisitions financed through bank debt. It now has about $10 million in debt and expects to generate about $40 million in revenues this calendar year, compared with $31 million in 2006 and $23 million in 2005. In announcing the funding, Perimeter said revenues have grown 575% between 2001 and 2006.
The company's most recent acquisition came in January, when it purchased Message Secure, a provider of managed security software to banks and other U.S. businesses. Last June Perimeter acquired ANE Technologies, a maker of intrusion prevention and other security technology for banks. In February 2006 it bought Breakwater Security Associates, a provider of managed security services and information risk management, and Red Cliff Solutions, a provider of managed security services to credit unions. Financial terms of these deals were not disclosed.
Perimeter plans to use the $50 million investment to expand its sales and marketing operations and make larger acquisitions, which it will finance through a combination of debt and equity. It also plans to expand into new market verticals. Perimeter has about 4,000 customers, more than 1,900 of which are financial institutions. The company also wants to expand its roster of midsized businesses in other market segments, such as retail and healthcare. Perimeter markets its products through channel partners, a direct sales force and network service providers.
"This capital will allow us not just to make acquisitions but to be a little more aggressive in terms of our organic growth," Miller said.
Joe DiSabato, managing director at Goldman Sachs, said his firm was attracted by Perimeter's management team, profitable business and lucrative market focus. "We also saw a very interesting and battle-tested technology platform for delivering a complex security solution to the market," he said.
Perimeter lets corporate customers effectively lease its online security software, which include e-mail and identity protection tools.
DiSabato said Goldman's priority is to help Perimeter grow. "We're confident that over time this management team can create value and that value will be realized by either the public markets or a strategic acquirer," he said.
Demand for Web-based security technology is growing as companies seek more efficient ways of safeguarding their computer systems. That, in turn, is driving investment and consolidation in the sector. In one large recent deal, Google Inc. on July 9 announced that it would acquire Postini Inc., which also specializes in on-demand security products, for $625 million.
