Quick Take
Insurance software company Guidewire Software (NYSE:GWRE) has announced an agreement to acquire Cyence for $265 million in cash and stock.
Cyence has created risk analytics solutions to help insurers more accurately model the risk of cyber hacking and loss.
Guidewire is paying a hefty Price/Sales multiple of 18x for Cyence, so management will need to quickly integrate its solution for cyber risk modeling and expand into other adjacent offering areas to fully realize the deal’s potential.
Target Company
San Mateo, California-based Cyence was founded in 2013 to develop a platform that better quantifies the financial impact of cyber risk.
Management is headed by co-founder and CEO Arvind Parthasarathi, who was previously president at YarcData, a spin-off from supercomputing company Cray (CRAY).
Below is an interview of Cyence’s CEO:
(Source: TheGenevaAssociation)
Cyence’s system combines data science, cybersecurity and economic analysis to help financial services firms ‘prospect and select risks, assess and price risks, manage portfolio risk accumulations and bring new insurance products to market.’
Interestingly, Cyence had raised a single $40 million funding round, in late 2016, from venture capital firms New Enterprise Associates, IVP and Dowling Capital Management.
Acquisition Terms and Rationale
Guidewire disclosed the acquisition price as $265 million net of cash, composed of closing net cash of $140 million and 1.6 million shares of new Guidewire common stock. Of the 1.6 million shares, 260,000 will be in the form of deferred equity, subject to ‘the achievement of certain retention and operating milestones.’
The addition of Cyence’s system to Guidewire’s offerings will enable it to provide software solutions covering what it calls ‘emerging risks’ - cyber, reputation and ‘new forms of business interruption risk,’ so Guidewire clearly has more in mind for the deal than just cyber risk modeling.
As Guidewire CEO Marcus Ryu stated in the
