Overlooked lessons from Mandiant's $1B acquisition

When Mandiant was acquired by FireEye at the end of 2013, I made little note of the $1 billion deal.

The transaction seemed too commercial in nature, so I quickly moved on to other news; however, I recently read an Aronson Capital Partners blog about the deal, and I wanted to pass on some of their observations.

First, some background: Mandiant is in the cybersecurity business providing security incident response management. When an attack occurs, Mandiant helps determine what has happened, and what the impact will be.

FireEye provides real-time threat protection. The two companies have had an alliance for a couple years and said that the acquisition was a natural extension of the alliance.

The Aronson analysis of the deal includes a lot of financial information about margins and earnings and growth rates.

What I didn’t know about Mandiant was that it was founded by a former government employee, who later was a government contractor.

The company’s first customers were government agencies, and Mandiant still has significant revenue from time and material contracts.

It targets complex, mission-critical cyber breaches, and if that doesn’t include the government, I don’t know what would.

I looked through the biographies of Mandiant’s leadership team, and nearly all of them have some sort of government experience, either working directly for agencies or for government contractors.

Mandiant probably isn’t a model for most government contractors, but for companies working the cutting edge of the government’s mission critical needs, there is something to be said for their mix of products and services.

Government contractors need to think beyond their traditional positioning, or see the higher margin, more valuable work go to other companies. The result for companies that are unwilling or unable to change is being stuck in the lower value segment of the market.

Next time, I’ll have to pay more attention to Mandiant-like deals.