Good morning, Nina Lindholm here with the Europe Wire from the London newsroom.

Evolving cyber threats are rapidly increasing the demand for better security in Europe. This morning, we delve into a sale in the segment, as Christian Stein, managing director at PSG Equity, and Emanuel Johnsson, partner at Verdane, tell PE Hub why certain cybersecurity companies are commanding premium valuations.

We then explore how the post-Brexit reset might impact the attractiveness of the UK for private capital firms, with comments from Rajaa Mekouar, CEO at Calista Direct Investors.

To finish, we have an update on Triton’s exit from a Danish taxi company. Read further to find out the MOIC the sale generated.

Scale and stability

European cybersecurity companies that scale across borders are not only catching the eye of global acquirers but are also commanding premium valuations, Christian Stein, managing director at PSG Equity, and Emanuel Johnsson, partner at Verdane, told PE Hub’s Irien Joseph.

The recently signed sale of Hanover, Germany-based Hornetsecurity to Sunnyvale, California-based Proofpoint highlights how cross-border expansion can transform a regional player into a strategic global asset. Hornetsecurity is a portfolio company of TA Associates, Verdane and PSG, and Proofpoint is backed by Thoma Bravo.

The transaction valued the company at over $1.8 billion, yielding a “strong” return for PSG both in terms of IRR and money multiple, according to sources close to the matter.

Hornetsecurity’s rise from a German SMB-focused e-mail security vendor into a global Microsoft 365 cybersecurity platform was key to its success, London-based Stein said.

Today, the company provides AI-driven M365 security, data protection, compliance and security awareness services to over 125,000 customers across more than 120 countries through a network of over 12,000 channel partners and managed service providers. It has over €160 million in ARR and more than 20 percent annual growth.

“We often invest in companies with a strong positioning in one country, one market and one solution, and then we broaden it to a broader product suite offering,” Stein said. “Then we internationalize it to create a pan-European, international sector champion. In this case, it’s cloud security.

“With Hornetsecurity, for example, it is the same product suite, but you’re selling to many more customers and internationally.”

Scale enables the business to achieve a more attractive financial profile than if it just focused on a smaller market, he said. “For larger private equities or when we exit to strategics, it helps the business to become more relevant. When you diversify across countries and regions, it also gives you scale and stability.”

International platforms typically command a premium and for an acquirer, it provides a larger addressable market, Stein said.

“All else being equal, you can get a higher premium valuation if you manage to internationalize and also have market leading positions in multiple countries. Rather than going to 10 countries with a small market share, it is often better to become a true leader in a few markets.”

That ability to prove cross-border success was a major draw for Proofpoint, Johnsson said. “Every market is different and to prove success across countries ticks lots of boxes. Cross-border acquisitions and successful integration over the years enabled cross-border success at scale for Hornetsecurity.”

I recommend checking out Irien’s full story. It covers how Hornetsecurity capitalized on the broader cybersecurity demand in Europe and more on its value creation journey.

First stop

Not all cross-border activity is smooth sailing, however. But the UK and EU having reached an agreement on areas including some trade and defense last week could provide welcome clarity for private equity investors, Rajaa Mekouar, CEO at Calista Direct Investors, told PE Hub.

“It’s always challenging to form a definitive view on high-level UK-EU announcements before the details are fully fleshed out,” said Mekouar. “That said, in principle, long-term investors, particularly in private equity, tend to welcome any moves that promote clarity, predictability, and above all, stability. In that sense, this reset sends a positive signal.”

Calista is a specialist advisory and co-investment firm with a focus on private equity and venture capital for private investors and single-family offices. Headquartered in Luxembourg with a presence in Brussels, the firm is opening an office in London.

“Even as a smaller, unregulated firm, we’ve felt the drag of added red tape,” said Mekouar. “London remains a vital hub and magnet for talent, capital and investment opportunities, despite the Brexit shake-up and abolition of the non-dom status. It also retains its position as the first stop for US fund managers looking to access Europe.”

For now, firms such as Calista are “willing to absorb the friction” and establish a local presence to ensure access to investments, according to Mekouar. “But over time, smoother pathways for collaboration will have benefits for those on both sides of the Channel.”

Wire readers will know London was a topic in yesterday’s newsletter, as Craig McGlashan covered several deals involving London-listed businesses.

Extra detail

Before I sign off, we have an update on a deal we covered yesterday.

Triton’s exit from Dantaxi generated 4x MOIC for Triton, according to sources close to the matter.

Dantaxi, based in Denmark, has over 800 electric taxis on the road.

Triton acquired Dantaxi in December 2018. It now has around 1,900 connected vehicles, nationwide coverage and strong ESG credentials, according to a release.

That’s all from me. Keep an eye out for the US Wire later today by Michael Schoeck. Irien Joseph is on Europe duty tomorrow.

Cheers,

Nina