F5 to Buy Fraud Protection Specialist Shape Security for $1 Billion
Deal comes seven months after F5 spent $670 million for NGINX
F5 Networks is adding fraud protection capabilities to its portfolio with the planned $1 billion acquisition of Shape Security, which leverages artificial intelligence (AI) and machine learning in its platform to protect against cyberattacks.
The Lowdown: Shape Security sells its platform, which also uses cloud-based analytics, to such organizations as banks, airlines, retailers, and government agencies.
The Details: The deal, announced this week, represents F5’s largest acquisition in its 23-year history and is expected to close in the first quarter of 2020. The boards of directors of both companies have approved the deal.
Shape’s technology is designed to protect enterprises against a range of threats, particularly credential-stuffing attacks, in which bad actors take stolen passwords from third-party data breaches and use them to take over online accounts. The application-protection platform analyzes the data flowing from the user into the application to determine what traffic is good and what is suspect. The Santa Clara, California-based company, founded in 2011, detects and blocks up to 1 billion fraudulent or unwanted transactions each day and protects 200 million human log-ins and other transactions.
F5 will combine Shape’s technology with its own and that acquired earlier this year through the $670 million purchase of NGINX, which brought with it expertise in DevOps, application delivery, and API management. F5, based in Seattle, has an array of products designed to protect applications and data in multicloud environments, including firewalls, load balancers, orchestration, identity and access management (IAM), and cloud services.
In a letter to employees, F5 President and CEO François Locoh-Donou wrote that “when you combine F5 and NGINX’s expertise powering over half of the world’s applications across all types of environments with Shape’s insight from mitigating 1 billion application attacks per day, you have a company that knows how to secure more applications – and more value – than any company in the industry. We believe that makes F5-NGINX-Shape absolutely essential to every digital organization in the world.”
Once the deal closes, Shape co-founder and CEO Derek Smith and other executives will assume management roles with F5 and the company will remain in its California headquarters.
Background: The deal comes three months after Shape officials announced a $51 million funding round, which brought the total amount raised by the company to $183 million and pushed it over the $1 billion valuation mark.
The Buzz: “We know from the companies we work with that applications are critical to running their business. To drive maximum business value and the best experiences for their customers, these apps need to perform flawlessly while protecting data security and user privacy. When a website or application experience is degraded by web fraud and abuse, the result is lost revenue, lost brand equity, and customers jumping ship to the competition,” Locoh-Donou said. “With Shape, we will deliver end-to-end application protection, which means revenue generating, brand-anchoring applications are protected from the point at which they are created through to the point where consumers interact with them – from code to customer. Beyond opening a fast-growing $4 billion adjacent market, Shape’s machine learning and AI-powered capabilities will scale and extend F5’s broad portfolio of application services and expand our ability to optimize and protect customers’ applications in an increasingly complex multi-cloud world.”
“Since Shape’s inception, we observed a consistent pattern in customer after customer: the use of F5 technology to deliver and enable their applications,” Smith said. “Now, we look forward to the opportunity to deeply integrate into F5’s platform for application delivery and security – F5 provides the optimum traffic flow insertion point for Shape’s industry-leading online fraud and abuse prevention solutions. This, combined with F5’s global go-to-market scale, means we can jointly protect significantly more customers’ applications and users from sophisticated attacks and malicious traffic.”
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