Palo Alto Networks agrees to buy CyberArk for $25B
techcrunch.com
techcrunch.com
I've seen this at Microsoft where acquiring startups that provide capabilities and then incorporating them into Azure or Defender led to the usage of those capabilities skyrocketing and those particular acquisitions (not going to specifics because NDA) ended up being profitable.
1. These synergies are hard to deliver, let alone 25x.
2. Paying 25x revenue implies you're forecasting way more (+30x?) in value.
That’s illegal of course but we stopped enforcing those laws somewhere in the early 2000s so here we are.
I worked for PAN back in the days where the sentiment, directly from Nir Zuk (founder), was: innovators dilemma. There's a relatively recent article [0] on the early days that does a nice job of laying out how that was a core tenant of how PAN operated. At the time I was there Mark McLaughlin was leading the charge as CEO and was the right person to drive PAN to $100M ARR.
But as you see the company shift after Mark you really start to see less of an engineering mindset of bringing new and disruptive technology to the landscape. Nikesh doesn't know how to do that. He's an ex-Googler and a finance background to boot. PAN is no longer disruptive in the technical sense. They're now disruptive to fresh ideas and good technology, which is bad for everyone.
I work now in a segment that competes with PAN in a small niche of their product set and I've displaced their points solution dozens of times in the last year. The product we're displacing is a product that PAN acquired in early 2019. The customers on that platform constantly complain about how the product has not evolved in years and support at PAN is horrendous. The last point, support, used to be a shining light for PAN. They had exceptional support - but, as with all things, scaling high quality is hard. It's why you won't find an In-N-Out too far off the Pacific coast. It's because of quality and their commitment to it. PAN is chasing stock prices and revenue, they aren't committed to their customers as they once were.
[0] https://94040.substack.com/p/disruption-in-the-firewall-the-...
If anything, this might make us stick with PA longer as they are the "niche" in our environment and presumably we will want to combine the contracts.
2. Large shared customer base,
3. Most enterprises need Identity SPM which Cyberark does pretty well at.
4. Vendor Rationalization is the name of the game. Security teams want to reduce spend significantly in both headcount and tooling, so PANW aquiriring Cyberark makes it easier to defend identity, cloud, networking, and other security spend as well as displace competitors. This is why platformization is becoming so popular.
The $25B price doesn't reflect a multiple on $1B, exactly. It represents potential sales of the CYBR product portfolio to current PANW customers, plus potential sales of the PANW portfolio to CYBR customers, at a multiple of ARR, negotiating a portion of which to current CYBR shareholders, which is above the market price for CYBR shares, representing the risk that such upsells may not succeed in practice.
Where the acquisition gets interesting is in what CYBR's identity products mean for PANW's portfolio, once integrated. SOAR gets to be much more deterministic if your SIEM knows all of the system's trusted principal identities instead of trying to piece it together based on network research, voluntary reports, and heuristics. In theory, an integrated product will deliver better security. But the question remains whether PANW will succeed at such integration or not. PANW has a long history of successful acquisitions, so, there's that...
It's also curious because their firewall platform seems/feels totally separate from the rest of cortex still.
I will say, they do have a ton of coverage, more so than any other single vendor I can think of.
These days software owners like AWS, GCP, Azure has there own superior security solutions embedded with in there stack instead of relying on external companies.
I think the same will happen for these AI based companies like OpenAI where they will release security solutions embedded within the model instead of relying on different external providers.
In one way these external providers bring in new security risk. Most of these companies offshore stuff. Like PAN offshores to India and Israel. This is an additional risk. Citizens of those countries have access US and EU data. Which no one seems to worry about.
Thats the reason, long run things are not looking good for these independent security providers. With the advent of AI, it is easy to embed security functions in their respective software stack.
https://strategyofsecurity.com/p/the-case-for-and-against-pa...
From the article:
> If Palo Alto Networks was going to do identity, they had to do it big.
> Commercially, there was no way they were going to build a successful identity business if they had just picked up a bunch of small companies and tried to put them together. They needed to bootstrap their entry into the market, so a scaled acquisition made sense.
> The identity market is at a completely different level of maturity compared to the situation when Palo Alto Networks built its cloud security business by stitching together smaller companies. That approach worked because the cloud security market was still forming. There essentially was no market leader to acquire.
> Identity has been through multiple generations of market leaders (Sun, IBM, CA, Oracle, and others. The market has already gone through multiple phases of disruption and M&A. For the most part, we've seen it all.
> Currently, we've landed with a handful of specialist identity players — some public, some owned by private equity firms. You know them: CyberArk, Okta, SailPoint, and Ping Identity. And then there's Microsoft. We'll get to that.
> Palo Alto Networks had zero chance of competing with those four companies (plus Microsoft and the other incumbents who still hold material market share) by building, buying, and partnering their way to a coherent identity offering.
> If there was one market where a massive deal had to be done, identity had to be it.
My read of that is basically they are buying a fast growing, big player in workforce identity that they can integrate in with their next generation security platform.
25B might not be a whole country, but it's definitely a whole country's phone network and internet infrastructure.
There are a number of very small countries with GDPs in the hundreds of millions of USD range. If you could buy a country for say 10× GDP you are looking at the low billions in GDP which is Bhutan or Zanzibar sized economies.
The problem is that countries are not often openly up for sale. You need military or political backing to actually get one. So you cannot literally buy a country.
On the other hand, I think it is reasonable to say that this amount of money is the value of an entire small economy, or of the entire stock market of a somewhat bigger one.
Yes. I think it's plausible to believe that it's a ridiculous valuation. That whatever the company has can be replicated for less money.
That's probably true for many companies, but seeing as Palo Alto Networks probably has some kind of software arm, it seems reasonable to expect that they'd actually have the capacity to get what they want for less.
2. Use the remaining billions to purchase a military force
3. Declare yourself sovereign
4. Export your goods and services at reasonable prices.
5. Be recognized by international organizations
6. You're literally a country for less than $24B
Good luck with that. No one has been able to do it for decades on unclaimed land like Sealand or Liberland. And you want to essentially annex another country's territory by force and be recognized? That's pure fantasy.
Recognition isn't just about capability or money, it's about political legitimacy. No major country would support such a move because it sets a dangerous precedent. If unilateral declarations of independence by billionares were normalized, it would embolden separatist movements globally, from Catalonia to Kashmir to Taiwan and undermine existing international norms. That’s a geopolitical headache no one wants.
Even CERN 3.0 won't get you a seat at the UN.
Source: got to step 4
Governments need taxes to a) keep the circus going and b) paying interests on the growing debt (a good chunk of it is held by the central bank).
Some countries are just left behind.
No one really trusts the Indian outsourcer with their internal systems. But they sure are cheaper, so the risks get mitigated by micromanaging and recording access to everything.
This then spreads to all employees, even those with skin in the game, and then nobody is productive any more. Not just the contractors.
It was expensive but worth every penny in my opinion, and it was literally everywhere. In enterprise IT it was just what you did, there was never really much of a question.
Nutanix will eventually eat the lunch that Broadcom doesn’t even care to try to eat.
Then all the posts I see in /r/networking about which firewall product is recommended are figments of my imaginations? (The consensus recommendations are PA if you have the money, Fortigate if you don't.)
Companies looking to refresh firewalls with more firewalls contradicts the statement "Most companies in 2025 don't own hardware firewalls.".
If most companies don't own them, what are they replacing?