While Barracuda’s acquisition in 2013 by Thoma Bravo helped the company a lot in transforming itself into a cloud-first company with a modern comprehensive portfolio, they think KKR is even better situated to Barracuda’s current stage of the growth cycle.
Barracuda has exchanged one private equity owner for another. The sale of the company by Thoma Bravo to KKR means much more than simply changing the name on the front of the cheque, however. While Thoma helped Barracuda transform into a modern cloud company, KRR is expected to support an aggressive expansion strategy which will benefit both the company and its channel partners. Terms of the deal were not disclosed, as Barracuda is a private company.
“There has been an evolution in these PE [private equity] partners, and which is the best fit for a company comes down to where the company is in their lifecycle,” said Hatem Naguib, CEO of Barracuda. “That impacts who is a good fit. When we were acquired by Thoma Bravo, we were a public company, but we had no ability to transform ourselves. Thoma invested in us and reset how we went to market, reset the back end to the cloud, and upgraded our portfolio. That transformation was very successful for us. Now we are out of that transformation and into a growth phase. To get growth, you have to invest.”
Under Thoma, Barracuda made acquisitions, although not as many as some companies who pursued an ultra-aggressive strategy in that regard.
“We expect that the acquisition strategy under KKR will be similar to what it has been,” Naguib said. “We are in a very dynamic business. In cybersecurity, you cannot sit on your laurels. We are very pleased with the results of our acquisition strategy. The SKOUT acquisition last year, which added a SOC and XDR capability, was a particularly great acquisition. We’ve been thrilled with the team we got with that.” Managed detection and response [MDR] extended detection and response [XDR], and secure access service edge [SASE] technology will be the focus of these acquisition efforts going forward.
Naguib confirmed that the existing Barracuda leadership team will not be going anywhere with the ownership change.
“It’s the same company,” he said. “KKR feels that the management team has done a phenomenal job. We are all very aligned with the strategy we are heading into now, as opposed to the reset we did when we came in from private ownership.”
One change that will take place will be the introduction of KKR’s broad-based employee ownership program, which is based on the belief that employee engagement is a key driver in building stronger companies.
“We feel very strong alignment with this,” Naguib indicated. “One of our values at Barracuda is to succeed together. Under the program they have been driving, universal equity becomes part of what they share with everyone from lower level employees up to managers and senior level people.”
How exactly this will roll out at Barracuda is less certain, as employee ownership does not take a one size fits all approach across the KKR portfolio.
“There are different types of equity plans, and the plans can be different, even with KKR,” Naguib said. “We want to do it in a way that will be of advantage to all.”
The transaction is expected to close by the end of the year, so obviously nothing will happen until then, but Naguib said that partners shouldn’t expect any unpleasant surprises when the deal does go through.
“I expect a mix of business as usual and positive change in the same way partners saw positive change when we were acquired by Thoma,” he indicated “Our relationship with our partners has always been critical, and that will not change. Our channel is supremely important to us. We want to work very closely with them, and Barracuda wants to be their preferred vendor.”