Palo Alto Networks Close to Buying Cyvera for Up to $190 Million

Deal would value company at two levels: one for financial investors, another for key personnel.

Palo Alto Networks, the U.S.-based network security firm founded by Israeli entrepreneur Nir Zuk, has started conducting a due diligence examination ahead of the planned purchase of Israeli cyber security startup Cyvera for a price that could reach $190 million.

Under the agreement, Cyvera’s financial backers would be bought out at a company valuation of $150 million, while the startup’s founders and key personnel would be paid for their shares at a valuation $190 million, so long as they remain with the company for at least three years after the purchase is completed.

Zuk personally initiated the deal, and the negotiations were held in Palo Alto, California, sources said.

Palo Alto’s proposed acquisition comes amid a surge of activity for Israeli cyber security companies that reflects the growing of multinational firms in the technology. Last Thursday, Imperva, a California-based network security firm founded and led by Israeli entrepreneur Shlomo Kramer, said it was purchasing the two Israeli cloud-based security firms Skyfence and Incapsula.

Last month, IBM announced it was opening a cyber security research and development center in Be’er Sheva in cooperation with Ben-Gurion University of the Negev, after the company purchased the Israeli firm Trusteer last August for $650 million. Military contractor and aeronautics manufacturer Lockheed Martin said it was establishing an R&D center of its own in Be’er Sheva, in cooperation with the U.S. database storage maker EMC and Ben-Gurion University.

Three Israeli companies in the cyber security sector, Adallom, Aorato and Cloudlock, also announced large fund raising rounds in the past few weeks.

Founded in 2011 by Uri Alter, Netanel “Nati” Davidi, Gal Badishi and Moshe Ben Abu, Cyvera raised its first round of capital the same year from the Elul and Kashtan groups. The company raised another $2 million in 2011 from San Francisco-based Blumberg Capital and last August completed an $11 million fundraising round led by Battery Ventures, the U.S. venture capital fund, in which Blumberg also participated.

Cyvera, which employs some 40 people at a research and development center in Tel Aviv and headquarters in San Francisco, has developed products designed to prevent remote-attacks on computer systems using Microsoft-based servers and end-points.

Tomer Appelbaum