Thales/Imperva: cyber security deal boosts defence group’s best division

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A new cold war is heating up. Western defence companies are rethinking their tactics. French defence group Thales is best known for missiles and machine guns. But cyber security was part of the company’s most profitable division last year. On Tuesday, it bolstered that division by acquiring data and application security group Imperva for €3.2bn ($3.6bn).

The backbone of Imperva’s business is a digital identity company called Gemalto that it acquired for €4.8bn in 2019. The overlap this provides with Imperva’s growing civilian data security and access specialisms will contribute to cost savings.

Imperva’s application security offerings such as firewalls add a new, faster growing segment. The main difference lies in customers. Unlike Thales’ core, most cyber security customers are civilian enterprises.

Thales is paying an enterprise value just over six times 2024 sales for Imperva. When private equity group Thoma Bravo took the business private in 2018 for $2.1bn it paid about five times.

There is cause for the increase. During its stewardship, Thoma Bravo grew sales, invested and made the company profitable. Meanwhile US cyber security rivals like Palo Alto Networks and CrowdStrike trade well above that multiple on nine and 11 times sales, respectively.

Thales’ cyber security and identity divisional revenues are expected to reach €4.5bn by 2024, including Imperva’s €450mn contribution. Profitability will rise from an estimated ebit margin of 14.5 per cent to 16.5 per cent in 2027. Cost savings will help, with €44mn targeted by 2028. 

These are all solid, commercial reasons to take an interest in Thales shares, which have risen by just over half in two years largely due to the war in Ukraine.

There is another reason. Thales has a cyber protection division for non-civilians, part of its core defence and security division. The company talks very little about this business but there is an obvious overlap with Imperva’s research and development spending.

Foreign governments or their agencies regularly launch digital attacks on the west. As this form of warfare increases, demand for Thales’ services should rise further.

Listen to Lex deputy editor Elaine Moore talk to creators, companies and critics about the next era of social media in the FT’s new Tech Tonic podcast series.