NCC Group acquires Matasano for £8.4 million

NCC Group plc (LSE: NCC, “NCC Group” or “the Group”), the international, independent provider of Escrow and Assurance Services, has acquired US-based Matasano Security LLC (Matasano), an independent security research and testing services provider, for a maximum consideration of £8.4m ($13.0m) in cash.

·      Matasano is a leading US security testing services provider with numerous blue chip clients particularly in software, IT, internet and financial services

·      Provides a range of services to detect security flaws in applications, systems and networks, using penetration testing, reverse engineering and source code review techniques

·      Substantially increases NCC Group’s presence in New York and Chicago and will further enable the Group to provide customers with one stop testing services across US and Europe

·      Consideration of £8.4m – initially £4.2m, then two further payments up to £4.2m in total over next 24 months against performance related targets

·      Immediately earnings enhancing

·      Year to 30 June 2012, Matasano revenue was $5.0m

·      Financed from existing debt facilities and internally generated cash flow.

“Matasano is a highly respected industry player and this acquisition is a key strategic development for us. It substantially increases our presence and profile in the US, particularly within the important east coast market, considerably widening our capabilities and industry IP and bringing a number of leading blue chip technology customers.

“We are delighted that the very experienced and successful management team is staying with the Group.  We are confident that they will continue to enhance their reputation as well as Matasano’s excellent financial track record of growth, supported by our Group resources and the wider international client base.”

Over the last 12 years the Group has secured a leading global position in security research, testing, advice and forensics as well as web performance testing through a combination of organic and acquired growth.

The purchase of Matasano is the Group’s eighth in the network testing and software security space and the second in North America.  The acquisition will substantially strengthen and complement the Group’s position in New York as well as providing a good opportunity to further expand the service offerings in Chicago.

The earnings enhancing acquisition will enable NCC Group to offer a wider geographical coverage in the US, as well as a broader range of information security assurance services as Matasano complements the Group’s existing capabilities.

Matasano is an independent security research and development firm, working with software vendors and enterprises to pinpoint and eradicate security flaws in applications, systems and networks, using penetration testing, reverse engineering and source code review techniques.

Matasano was established in 2005 by the current management team, is headquartered in New York and employs 29 employees, most of whom are testers and also has offices in Chicago and Mountain View, California.

Its clients include numerous blue chip organisations and 95% of its revenue is derived from the provision of services to the software, information technology, internet, banking and insurance sectors. The business will be managed autonomously within the Group’s Assurance Division by the existing Matasano management team and will trade as Matasano, an NCC Group company.

The initial consideration payable is £4.2m ($6.5m) in cash, subject to balance sheet adjustments, with two further cash payments of up to £4.2m ($6.5m) in total against performance related targets over the next 24 months to 31 July 2014.

For the year ended 30 June 2012, Matasano reported revenue of $5.0m with much of the future revenues being derived from recurring contracts with blue chip corporations.

Matasano has net liabilities of $0.2m and has gross assets of $0.8m.  The Group will provide $250k of working capital facilities.  Transaction costs which are expensed are about £0.5m.

The acquisition will be financed from NCC Group’s existing debt facilities and internally generated cash flow.

NCC Group expects to publish its Interim Management Statement on 18 October 2012.