Check Point-Sourcefire deal called off

Published 27 March 2006

Representatives of defense and intelligence agencies on CFIUS, the U.S. government committee examining the acquisition of U.S. companies by foreign companies, objected to Check Point’s acquisition of security software developer Sourcefire; with the firestorm over the scuttled DP World deal and legislation pending in Congress to limit foreign companies ownership of security-sensitive U.S. companies, the deal became doomed, and late last week the two companies announced its cancellation

Timing is everything. Just ask Check Point Software Technologies, an Israeli software innovator which last October announced its plans to acquire Columbia, Maryland-based Sourcefire for $225 million. Sourcefire, a 140 employee-strong company, offered security software to U.S. government agencies, among them the National Security Agency (NSA) and other intelligence services. The companies applied last fall to the Committee on Foreign Investment in the United States (CFIUS) for approval, but unlike the Dubai Ports World deal, which was handled by the committee at the same time, the Check Point-Sourcefire deal ran into strong opposition from representatives of defense and intelligence agencies in the committee.

CFIUS consists of representatives from twelve agencies, including the DoD, DHS, Treasury, and others. Signs of trouble for the deal emerged in mid-February, when Check Point said that its application had been elevated to a more serious investigative phase under the CFIUS review process. That phase is a forty-five-day full-blown national security review, applied to especially security-sensitive deals.

The opposition of intelligence and defense representatives on the committee to the deal, and the elevation of the review, was bad enough, but the fact that these two occurred against the backdrop of the firestorm which erupted when word of the DP World deal leaked out, doomed the deal, as we predicted here a few weeks ago. The point was not lost on Check Point: The “timing for this acquisition may have been bad and given the respective technologies it became complex,” it said in a statement.

Sourcefire, a privately held company, was founded in 2001. Last year, the company brought in more than $30 million in revenue. Government clients make up about 13 percent of that revenue.