M&A Alert—June 24, 2016
AllClear ID agrees to acquire mobile multi-factor authentication platform Encap Security
Author: Eric Risley, John Ascher-Roberts
Transaction Size: Undisclosed
On June 24, 2016, AllClear ID entered into a definitive agreement to acquire mobile authentication provider, Encap Security, for an undisclosed sum. Architect Partners acted as the exclusive financial advisor to Encap Security in this transaction.
Encap Security provides financial institutions mobile multi-factor authentication and e-signature for their mobile banking operations, named the Smarter Authentication Platform. Encap uses multiple layers of protection to ensure secure access including location and behavior combined with the traditional three layers of protection; 1) identifying “something you have” (smartphone), 2) prompting for “something you know” (PIN) and 3) sensing “something you are” (TouchID). Winner of the SC Magazine Award for Best Multifactor Solution, Encap’s clients include EnterCrad, Viamo, and Santander. Competitors include Certivox, Duo Security, and Authy.
Thomas Bostrøm Jørgensen founded the Oslo, Norway-based company in 2006. Prior to its acquisition, Encap had raised $8.3 million in funding from early stage Norwegian VC’s Alliance Ventures (Arne Tonning) and ProVenture Management (Herbjørn Skjervold).
AllClear ID, founded in 2004 by Bo Holland and headquartered in Austin, Texas provides data breach readiness, response and recovery solutions to mitigate the damage from unauthorized data access. Its products help large companies prevent and minimize lost customer revenue and brand damage from a data breach. Additionally, the company offers fraud protection, identity theft monitoring and identity repair services to consumers. The company serves Fortune 1000 companies, healthcare organizations, government agencies, and universities, with large volumes of personally identifiable information. The company’s customers include Best Buy, The Home Depot, Anthem, and Walmart. Competitors include Experian and Digital Guardian.
AllClear ID acquires Encap Security for an undisclosed sum.
Comparable transactions include TransUnion’s acquisition of Trustev for $21-44mm in December 2015 (2.7-5.6x TV/IC), Salesforce’s acquisition of Toopher for $15mm in April 2015 (15x TV/REV), Early Warning’s acquisition of Authentify in April 2015 (undisclosed), and Vasco’s acquisition of Cronto for $21.9mm in May 2013 (undisclosed).
Encap’s authentication capabilities help augment AllClearID’s breach response solutions with data breach prevention capabilities. Through its identity management and authorization solutions, Encap can better prevent data breaches and stop these problems from occurring in the first place.
Furthermore, the acquisition of Encap Security establishes AllClear ID’s capabilities in the European market. The introduction of important regulatory modifications like the General Information Defense Regulation (GDPR), which aims to prevent data breaches through unifying regulation throughout the EU, and the Payment Services Directive (PSD II), which provides the legal foundation for the creation of an EU-wide single market for payments, creates many opportunities for Encap and now subsequently, AllClear ID to capitalize.
Architect Partners’ Observations
As more and more data becomes accessible through the web and mobile devices, so does the threat of unauthorized people getting hold of valuable, personal information. As seen in the cases of Yahoo, Target, Sony, Anthem, AOL, and Myspace, just to name a few, data breaches are increasingly prevalent and costly. Norton Cybercrime Reports estimate the price tag of consumer cyber attack to be over $40 billion in the US alone and the average cost of a single data breach is over $5 million.
This is the 7th cross-border transaction Architect Partners has advised representing acquirers and sellers in the U.S., Japan, Norway, Canada, Israel, Ireland and India.