By Calvin Biesecker
Britain’s QinetiQ yesterday said it has agreed to acquire Cyveillance, Inc., a Northern Virginia-based firm with software products that help commercial firms ward off cyber attacks, to boost its capabilities in the cyber security area and tap into another growing area of the security market in the United States.
QinetiQ said it will pay $40 million upfront for Cyveillance and potentially up to $40 million more depending on the company’s financial performance for the two-year period ending in December 2010. The transaction is expected to close next month pending regulatory approvals.
Cyveillance will become part of the Mission Solutions Group of QinetiQ North American (QNA), the U.S.-based division of QinetiQ.
QNA already provides information assurance and network security services such as consulting related to the Federal Information Security Management Act. Customers for these services include the intelligence community, Army, Navy, and federal civilian agencies such as the Departments of Commerce and Homeland Security.
Acquiring Cyveillance, whose customers are largely commercial firms such as Time Warner‘s [TWX] subsidiary America Online and Microsoft [MSFT], will give QNA cyber security products it can market to its existing and potentially new customers in the U.S. defense and security markets.
“Cyveillance’s position in online monitoring technology builds on our existing capability in the growing U.S. cyber security market,” Graham Love, CEO of QinetiQ, said in a statement. “It complements our portfolio in security and intelligence solutions and services and provides the potential to leverage further QNA contracts in open source intelligence and technology protection. We believe Cyveillance is well positioned to benefit from the increased importance that the U.S. administration is placing on addressing cyber security as the threat of new and increasingly online threats increases.”
For its part, Cyveillance said the combination will provide it access to new resources and infrastructure to penetrate new markets.
Cyveillance’s software products are used by companies to conduct Internet monitoring for various threats to their information networks, such as phishing, identity theft, fraud, corporate security, information protection, corporate and partner compliance, and brand protection. The products enable information security specialists to take action to prevent attacks.
While the vast majority of Cyveillance’s business is with the commercial sector, the company has occasionally worked on government contracts.
Cyveillance has 75 employees and had sales last year of $10.4 million with an operating loss of $1.6 million. The company is owned by venture capital partners Lazard Technology Partners, ABS Capital Partners, New Enterprise Associates and Black Rock, as well as management. QinetiQ expects the deal to be accretive to earnings for its fiscal year ending March 31, 2010, if it is effective in cross-selling the security software to its existing customers.
Cyveillance said it did not use a financial adviser on the transaction.