Cybersecurity firm Proofpoint considers pre-IPO financing as it plans to return to public markets – NBC 6 South Florida

• Proofpoint is exploring an initial public offering in the next 12 to 18 months, the cybersecurity firm’s CEO Sumit Dhawan told CNBC this week.
• Dhawan, who was named CEO last year, is urging the company to consider strategic mergers and acquisitions of smaller cybersecurity firms to spur industry consolidation.
• This would be Proofpoint’s second IPO after its 2021 acquisition by private equity firm Thoma Bravo for $12.3 billion.

LONDON — Privately held cybersecurity firm Proofpoint is exploring tapping outside investors for pre-IPO financing and considering mergers and acquisitions of smaller cyber companies as it looks to return to public markets in 2026, CEO Sumit Dhawan told CNBC.

“We are looking at exploring the public markets in the next 12 to 18 months,” Dhawan, who took the reins as Proofpoint’s newly appointed head in 2022, a year after the company was acquired by private equity firm Thoma Bravo.

Dhawan added that the timing of Proofpoint’s IPO will continue to depend on overall market conditions as well as the outcome of the 2024 US presidential election.

Since Thoma Bravo’s 2021 buyout of Proofpoint and Dhawan’s subsequent appointment as CEO, the company’s leadership has been pressing the company to consider strategic opportunities such as mergers and acquisitions of smaller cybersecurity firms to spur industry consolidation.

Noting that there are too many players in the cybersecurity market today, Dhawan said Proofpoint is looking for acquisition targets that provide the company with a “strategic fit” – at the right price.

“It’s happened in a lot of other technology spaces – it’s happened with infrastructure, it’s happened in the application platform space – where you’re starting to build fewer vendors but richer platforms, and as a result there’s going to be consolidation,” Dhawan told CNBC in an exclusive interview this week week.

“There are currently around 2,000 unprofitable venture-backed cybersecurity companies, so it is clear that they will either consolidate or potentially go out of business. Because there is no way any market could have that many players. So it’s going to happen, it’s definitely going to happen.”

Dhawan said there is little bidding range in the market today when it comes to cybersecurity capabilities, which means target companies are asking for more money at the asking price than the quotes they are offered. However, he added that he sees “great opportunities” in the market.

Dhawan noted that Proofpoint’s key priority in seeking M&A targets is geographic expansion, adding that the company sees strong growth opportunities in non-English-speaking countries such as Japan, South Korea and the Middle East, where the number of cyber breaches is skyrocketing due to development of generative artificial intelligence.

According to data shared by Proofpoint and CNBC, business email compromise attacks increased by 35% in Japan, 31% in South Korea and 29% in the United Arab Emirates. According to Dhawan, this is because generative AI makes it easier for hackers to personalize emails in multiple languages.

The path from private to public

Founded in 2002 in Silicon Valley, Proofpoint creates technology that helps companies prevent phishing attempts and other cyberattacks across a range of platforms, including email, social media, mobile devices and the cloud.

The company competes with the likes of Palo Alto Networks, CrowdStrike and Fortinet, and shares of all three companies have surged over the past 12 months. CrowdStrike – the company that caused a global IT outage this year due to a software problem – is up 65% year over year.

Shares of Palo Alto Networks and Fortinet rose 44% and 32%, respectively, over the same period.

Proofpoint went public in the U.S. in 2012 but was subsequently delisted after Thoma Bravo acquired the company in a $12.3 billion deal in 2021. The buyout came after investor concerns about slowing revenue growth.

Now Proofpoint is looking to tap the public markets once again.

“We are a little different from typical companies going public,” Dhawan said. “They are usually smaller. They usually have a completely different profile. They are often characterized by uncertainty about profitability and are usually unable to consolidate easily.”

Taking Proofpoint public would not be the first time a Thoma Bravo company acquired in a private equity buyout has made a second public offering. In 2019, cybersecurity company Dynatrace, which Thoma Bravo took private in a 2014 buyout, re-listed on the New York Stock Exchange.

Dhawan told CNBC that Proofpoint could go through “multiple rounds” of financing to expand ownership of the company to other private equity investors, Dhawan told CNBC, adding that was among the options he was considering.

“We are close to starting the process” of raising funds from non-private equity investors, Dhawan said. However, he emphasized that the company has not officially started this process.

Proofpoint’s CEO said he hopes what sets his company apart from other technology and cybersecurity companies seeking a similar IPO path is a good balance of growth and profitability, double-digit growth and strong leadership in its market.