Cybersecurity has been a dealmaking bright spot amid the broader software gloom, fueled by bets that AI adoption will boost demand for security products. But it’s been hard for private equity firms to get in on the sizzling sector.
Corporate buyers have been snapping up cybersecurity companies, competition that makes it harder for private equity firms to buy at prices that leave room for attractive returns when they eventually sell. Rising interest rates further limit what the firms can pay in debt-heavy buyouts.
That makes Thoma Bravo–backed cybersecurity company Proofpoint’s agreement last week to acquire data security company Varonis Systems in a $6.3 billion deal a notable example of how private equity can still find an opening in a hot market. And the tech-focused private equity giant is likely to do at least one more deal around this size in the coming year.
The proposed acquisition values Varonis at around six times forward annual recurring revenue, according to a person close to the deal. That’s a discount compared to similar public companies like cloud security and compliance company Qualys, which is trading at around 8 times forward annual recurring revenue.
Cybersecurity acquisitions were already booming heading into this year, including Alphabet’s $32 billion agreement to buy Wiz and Palo Alto Networks’ roughly $25 billion deal for CyberArk, both announced in 2025. But interest in the sector has intensified amid much-hyped releases of powerful models like Anthropic’s Mythos and a series of hacking incidents and agents gone rogue. It could further increase after Wednesday’s disclosure of AI finding a security flaw in open-source programming language PHP, which most websites use.
“People ended up realizing that the…threat vector effectively multiplied to infinity,” said Brian Thom, a managing director at middle market investment bank Brown Gibbons Lang & Co. with a focus on infrastructure software and cybersecurity.
Cybersecurity mergers and acquisitions hit a record 170 transactions in Europe and North America during the third quarter, according to an Arrowpoint Advisory report from earlier this month. Corporate buyers have been particularly active, including Accenture, which this summer acquired a majority stake in industrial cybersecurity company Dragos, plus two smaller companies in deals with a combined enterprise value of more than $4 billion.
Thoma Bravo, for its part, saw an opportunity as Varonis’ stock price came under pressure. Varonis has spent recent years moving customers from licenses to cloud-based subscriptions, temporarily depressing revenue growth, and announced late last year it would phase out older software by the end of 2026. Its shares had tumbled nearly 50% from last October to around $33 this June, right before reports of a potential takeover surfaced.
More broadly, some software-focused private equity firms are hunting for companies with depressed share prices but still-credible growth prospects that can hold up even under threat of AI disruption. And many are still nursing the hangover from a software binge during the low-interest-rate years of 2020 and 2021.
The Varonis acquisition comes at a critical time for Thoma Bravo, which has owned Proofpoint since taking it over for $12.3 billion in 2021. Proofpoint is generating more than $1 billion in earnings before interest, taxes, depreciation and amortization, excluding the proposed Varonis acquisition, the person said, while five years under Thoma Bravo ownership puts it at the point when private equity firms typically face growing pressure to cash out.
Adding Varonis expands Proofpoint’s capabilities beyond its traditional focus of protecting employees from cyberattacks, including phishing and other email threats, to securing sensitive corporate data and controlling who can access it, including employees and AI agents. Though Proofpoint has made previous acquisitions under Thoma Bravo, the Varonis deal is by far its largest and gives it a bigger foothold in AI-related defenses that could arguably help it become a more compelling candidate for an initial public offering.
Thoma Bravo could be on the hunt for more multibillion-dollar cybersecurity acquisitions following the Varonis deal, which is set to close in the first half of 2027.
“There’s a finite number of very large cybercompanies that we can invest in,” said Andrew Almeida, a Thoma Bravo partner who oversees cybersecurity and infrastructure software investments.
The firm is particularly interested in companies that generate revenue from the growing use of AI agents rather than relying solely on traditional pricing models that charge based on the number of human users, he said, and it plans to have another deal similar to the size of Varonis within the next 12 months.
“Having agentic revenue, not just an agentic vision, but agentic revenue, is a must. And then having a pricing model that can capture this upcoming and ongoing explosion of agents is also a must,” Almeida added.
Wobbly IPO Window
All eyes are on when Anthropic will finally make its IPO paperwork public, marking one of the final steps toward its hotly anticipated debut. Anthropic announced it had confidentially filed in June, and by late summer was preparing for an IPO as soon as late September. Now the latest chatter is that the filing could appear by the end of this week.
Other AI-related IPOs that initially looked poised to go ahead of Anthropic’s have been pulled or delayed amid mounting concerns about the costs of financing data centers and chips, while the broader IPO market has lost momentum in the midst of Treasury volatility. That’s raised questions about who will test the market next—and whether Anthropic’s offering could revive IPOs in general. Some IPO advisers, however, say other companies may need to go public first, paving the way for the AI giant.
“I don’t think Anthropic going public is going to open the floodgates,” said Edward Best, co-chair of Willkie Farr & Gallagher’s capital markets practice. “I think that Anthropic is going to wait until the water starts moving, and then if Anthropic comes through, it’s just going to widen the river.
“They can’t take the risk that they don’t do well. They’re going to wait until they see a better path, and then other people are going to join right afterwards,” he added.
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