QinetiQ strengthens presence in US cyber security market through acquisition of Cyveillance, Inc

QinetiQ Group plc announces today it has signed an agreement to acquire Cyveillance, Inc., a provider of online monitoring technology to identify and track data in cyberspace, for initial cash consideration of $40 million. This acquisition positions QinetiQ in the North American and international cyber intelligence markets and is aligned with QinetiQ's strategic focus on key high value, high growth segments of the US defence and security market.

Under the terms of the deal, QinetiQ will acquire 100 per cent of Cyveillance, Inc. from venture capital funds and management for an initial cash consideration of $40 million. There will be potential further consideration of up to a maximum of $40 million depending on the company's financial performance during the two-year period ending 31 December 2010. The acquisition is expected to close in June 2009 following receipt of regulatory approvals.

Cyveillance, Inc. is a venture-capital backed company with 75 employees, based in Arlington, Virginia, USA. Venture capital fund partners include Lazard Technology Partners, ABS Capital Partners, New Enterprise Associates and Black Rock. The company develops and operates online monitoring technology to identify and track data on the internet. It provides preventative, proactive solutions as well as reactive solutions with applications including identity theft management, intellectual property management, competitive intelligence and open source intelligence collection and analysis. It provides an integrated offering to customers who rely on the web for their trading activities.

The acquisition builds on QinetiQ's strategy to grow its North American business whilst supporting QinetiQ North America's ("QNA") focus on key national security markets, specifically in the emerging and growing multibillion dollar cyber security marketplace.

Cyveillance provides integrated cyber security solutions to a range of high profile commercial customers on multi-year subscription fee contracts that give good visibility of future earnings. The acquisition also offers excellent opportunities to roll-out Cyveillance's solutions to QNA's existing customer base including government agencies in the US and worldwide.

In the year to 31 December 2008, Cyveillance, Inc. generated revenues of $10.4 million and recognised an operating loss of $1.6 million. Gross assets as of 31 December 2008 were $5.3 million. It is expected that the acquisition will be earnings accretive in the year ending 31 March 2010 as Cyveillance continues to grow in its traditional commercial markets and as QinetiQ cross-sells the company's unique products and services into its existing government customer base.

Commenting on the acquisition, Graham Love, QinetiQ Group CEO said: "Cyveillance's position in online monitoring technology builds on our existing capability in the growing US cyber security market. It complements our portfolio in security and intelligence solutions and services and provides the potential to leverage further QNA contracts in open source intelligence and technology protection. We believe Cyveillance is well positioned to benefit from the increased importance that the US administration is placing on addressing cyber security as the threat of new and increasingly sophisticated online threats increases.2