Cloud security provider Alert Logic announced on Tuesday that private equity firm Welsh Carson has acquired a majority stake in the security-as-a-service provider, a deal which is expected to close by the end of the month.
Selling shareholders include Updata Partners, Covera Ventures, Mercury Fund, OCA Ventures, Access Venture Partners, and Industry Ventures.
Private equity firm investment is a popular avenue in hosting industry acquisitions and growth. In July, Host Europe Group was acquired by private equity group Cinven. When GoDaddy was acquired in 2011, it was by private equity groups KKR Silver Lake Partners and Technology Crossover Ventures. This was after rumors of a possible IPO.
Alert Logic’s existing management will continue to operate the business. Welsh Carson is also investing primary capital in the business, which will fund geographic and product expansion.
Alert Logic offers security solutions for hosting and cloud customers, including its security and compliance solution Alert Logic Log Manager, which offers real-time security monitoring of critical security logs.
Alert Logic says it works with “more than half of the largest managed hosting and cloud service providers” including Rackspace and Internap, competing with security providers like Imperva and SourceFire, which was recently scooped up by Cisco for $2.7 billion.
With recent estimates projecting cloud market revenue to reach nearly $20 billion by the end of 2016, the cloud continues to face diverse and complex attacks, which can be difficult for service providers to mitigate, let alone communicate with their customer. It is clear that private equity investment in the space will continue to grow.
“Our partnership with Welsh Carson allows Alert Logic to continue increasing the scale of our business to meet the high demand for IT security in the cloud and in virtualized enterprise data centers,” Alert Logic CEO Gray Hall said in a statement. “Our strategic focus remains intact and this transaction brings improved access to capital and other resources, positioning us to expand our geographic footprint, strengthen our team and further accelerate growth in our market-leading cloud security offerings.”
In July, Alert Logic recorded $10.1 million in GAAP revenue for the fiscal quarter ending June 30, 2013, representing a 43 percent increase over the same period in 2012.
“Alert Logic is uniquely positioned to capture the rapidly growing market demand for securing IT infrastructure in the cloud. We do not believe that any other company has Alert Logic’s ability to deploy such a broad portfolio of security solutions in any cloud environment, a multi-tenant SaaS delivery platform that has been proven to scale to big data proportions, or a large established channel of leading cloud and hosting service provider partners,” Michael Donovan, a Welsh Carson General Partner said in a statement. “These unique assets combined with a strong management team make Alert Logic an ideal platform for capturing market share in one of the fastest-growing segments of the global IT industry.”
At the HCTS NA last year, Hall said service providers will undermine their growth if they fail to provide customers with the level of security in the cloud that they can maintain within their own four walls.