Dell Technologies on Tuesday confirmed it’s selling its RSA cybersecurity business to a consortium led by Symphony Technology Group (STG), Ontario Teachers’ Pension Plan Board and AlpInvest Partners, for more than $2 billion in cash.

Speculation intensified last month that Dell was looking to offload RSA, which it gained through its acquisition of EMC in 2016. The transaction, which includes the purchase of RSA Archer, RSA NetWitness Platform, RSA SecurID, RSA Fraud and Risk Intelligence, and RSA Conference, is expected to close this summer or fall.

Eric Parizo, senior analyst at Omdia, tells us what happens next is unclear as STG is a “somewhat unknown entity, and this is certainly its biggest play in cybersecurity to date, but it doesn’t have a history of long-term holdings.” He expects a relatively short period in which Symphony “right-sizes” the business, and then flips it to one or more other buyers.

“I’ve long believed that RSA may be worth more if it were broken up than sold as a whole,” he said. “Its various product lines are hardly complementary, and its product lines may be more valuable individually to other vendors already competing in those segments. For instance, it wouldn’t be a surprise to see a deep-pocketed vendor like Cisco eventually try to pick up NetWitness, given Cisco’s longstanding and successful technology partnership with RSA and its strong need for a ‘front end’ for its SecOps ambitions. And of course the RSA Conference events and brand remain hugely valuable.”

“In determining the best long-term future for RSA, we sought a partner that was enthusiastic about RSA’s mission, committed to its customer and partner base, and interested in maximizing the power of RSA’s talent, experience and tremendous growth potential,” wrote Jeff Clarke, Dell Technologies’ COO and vice chairman, in a blog, “We believe STG will be the right custodian to achieve these goals. RSA, including RSA Conference, is invaluable to our customers and the security community at large — and with that in mind we will work to ensure a seamless transition.”

Parizo said the move is hardly a surprise, as RSA has been rumored to be on the block for years now.

“At various points it seemed as if there were reasonably good opportunities to integrate RSA technologies with those of the broader EMC/Dell product portfolio, such as RSA SecurID and other IAM tools with Dell’s Quest Identity Manager, or RSA NetWitness or its endpoint security capabilities with technology from VMware,” he said. “However, last year when VMware acquired Carbon Black to serve as the technological centerpiece of its new cybersecurity group, it became clear that RSA was a non-starter within Dell and VMware, and a sale of RSA was inevitable.”

There are some surprises about the announced deal, Parizo said. Some may have expected a higher price tag, but considering RSA has “essentially treaded water for the past decade, and that EMC acquired RSA for approximately $2.1 billion in 2006, the clear message is that RSA has gained no value in the past 13 years,” he said.

“That is a brutal reality for all involved,” he said. “The companies also announced an unusually long closing period of six to nine months. This is likely due to RSA’s heavy involvement with the U.S. government and the scrutiny the deal may receive, but this also increases the slight possibility that the deal may be modified in some form before it closes.”

More than 12,500 customers use RSA to enable their digital transformation, address increasingly advanced cyberthreats and adapt to more complex digital regulations.

“As one of the world’s elite security brands, RSA represents a great opportunity for solving some of the rapidly developing customer challenges that go along with digital transformation,” said William Chisholm, STG managing partner. “We are excited and fully committed to maximizing the power of RSA’s talent, expertise and tremendous growth potential, and continuing RSA’s strategy to serve customers with a holistic approach to managing their digital risk.”

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Symphony Technology Group is leading an investor group to buy
Dell Technologies
’ RSA security business for $2.075 billion.

Ontario Teachers’ Pension Plan Board and AlpInvest Partners are also part of the group. The sale, which is expected to close within six to nine months, includes RSA Archer, RSA NetWitness Platform, RSA SecurID, RSA Fraud and Risk Intelligence, and RSA Conference.

Dell (ticker: DELL) is selling RSA to simplify its business and product portfolio, said Jeff Clarke, COO and vice chairman, in a statement. “It also allows Dell Technologies to focus on our strategy to build automated and intelligent security into infrastructure, platforms and devices to keep data safe, protected and resilient,” he said.

Dell’s stock fell 11 cents, or 0.2%, to $52.77 on Tuesday. The
Nasdaq Composite
ended the day flat.

RSA helps companies with manage areas including detecting and responding to threats, identity and access management, as well as integrated risk management. The business has more than 12,500 customers. The division also runs security conferences, including one that is taking place later this month in San Francisco, according to The Wall Street Journal.

Dell acquired RSA as part of its $60 billion purchase of EMC in 2016. EMC, for its part, bought RSA in 2006 for $2.1 billion, according to press reports. The current sale of RSA kicked off earlier in the first quarter;
Morgan Stanley (MS)
advised on the process. Hogan Lovells provided legal advice to Dell.

RSA wanted a partner that was enthusiastic about its mission, said Rohit Ghai, RSA’s president, in a blog post. “Symphony Technology Group (STG) fully supports our vision, and with a more independent configuration, we expect to be in an even better position to accelerate innovation, ensure customer success with our portfolio of on-prem and cloud solutions, and expand opportunities for our partner ecosystem,” Ghai said.

Data breaches and fraud have become commonplace. Gartner estimated companies globally would spend more than $124 billion on cybersecurity in 2019. As a result, cybersecurity remains a popular area of investment for private equity. Thoma Bravo and Insight Venture Partners are among some of the most active investors.
KKR
(KKR) in April also acquired a minority of KnowBe4, which offers cybersecurity training, according to Fortune.

For Symphony, the deal comes less than a year since the technology-focused private-equity firm acquired Red Seal, which provides cyber risk modeling. It’s unclear what Symphony’s plans are for RSA or how much of the company it owns.

The Palo Alto, Calif. firm invests in software, data and analytics businesses. Earlier this month, STG acquired a majority of CadmiumCD, which provides event-technology software. Symphony in December 2017 was seeking $850 million for its fifth flagship fund, according to a Securities and Exchange Commission filing.

AlpInvest, a unit of the
Carlyle Group,
is a fund-of-funds. It typically invests in PE funds but takes part in secondary transactions and co-investments. A spokeswoman for AlpInvest declined to comment on RSA.

Ontario Teachers, which invests and administers the pensions of 327,000 active and retired teachers, had $201.4 billion in net assets as of June 2019. The pension plan typically invests in venture capital and private- equity funds. It also takes part in co-investments.

UBS Investment Bank and Jefferies advised STG, while John Amorosi, Darren Schweiger, and Arthur M.T. Burke of Davis Polk & Wardwell provided legal advice. UBS and Jefferies provided financing for the RSA deal.

Dell, Symphony and Ontario Teachers didn’t respond to requests for comment.

Write to Luisa Beltran at [email protected]