To boost its endpoint security service capabilities, Palo Alto Networks (PANW) acquired Israel-based company Secdo. The deal may give the company access to Secdo’s advanced EDR (endpoint detection and response) features, which include unique data collection and visualization. The financial terms of the deal have not been disclosed. After completion of the deal, Palo Alto Networks could combine Secdo’s EDR technology with its Traps platform, allowing it to visualize, identify, and prevent cyber attacks.
The graph above shows Palo Alto’s acquisition trends over five years. The company made just three acquisitions, investing ~$192 million. However, the company’s strategy seems to have changed recently. In fiscal 2017, Palo bought LightCyber for ~$91 million, and in March 2018, Palo completed the acquisition of Evident.io, a pioneer and leader in public cloud infrastructure protection.
Strong free cash flow driving acquisition
Palo Alto’s strong free cash flow and lower leverage have helped it continue with its acquisition goals. In fiscal 1H18, Palo generated free cash flow of $460 million, compared with $352 million in fiscal 1H17. It has maintained an average yearly free cash flow of $352 million in the last five years, which may have encouraged its acquisitions.
Mergers and acquisitions in the IT (information technology) sector are quite common. In October 2017, IBM (IBM) bought Vivant Digital, and software company ServiceNow (NOW) made six small acquisitions between 2016 and 2017.