Palo Alto Networks has just confirmed one more major piece of security startup M&A out of Israel: It has acquired Talon Cyber Security, a specialist in building enterprise browsers for securing distributed workforces sources. Source say the deal is valued at $625 million.
This is PA’s second Israeli security acquisition within a week: Last Tuesday, Palo Alto Networks announced that it was scooping up cloud data specialist Dig Security, for a price that sources close to the deal tell TechCrunch was around $400 million. As with Dig, Talon will be integrated with Palo Alto’s Prisma cloud security division.
We first reported that the two deals were in the works in September, after hearing for weeks beforehand that it was about to make some big acquisitions to beef up its security bench.
Talon — co-founded by Ofer Ben-Noon and Ohad Bobrov — had raised around $143 million, with its investors including Team8 (a specialist cyber investor in Israel), Entrée Capital, Evolution Equity, LightSpeed and Cyverse Capital. Sources tell us Talon was approached proactively and was not in the market to be acquired.
Today’s acquisition, along with last week’s for Dig, are significant developments in the Israeli technology ecosystem, where right now it is anything but business as usual.
The current war between Israel and Gaza — which kicked off after terrorists from the latter territory busted through the wall separating the two, killed some 1,400 civilians and took hundreds more back to Gaza as hostages — has, unsurprisingly, had a strong chilling effect on the region’s technology industry, which has in many ways come to a standstill in the last month.
As we have reported previously, tech accounts for 18% of Israel’s GDP, and some 14% of all people in the country work directly for the tech industry (with many others indirectly). A number of those civilians have either been called up for duty, or are involved in volunteer efforts, effectively putting a lot of their regular working lives on hold.https://buy.tinypass.com/checkout/template/cacheableShow?aid=Fy7FpgyUxA&templateId=OTOB0H38YGQ3&templateVariantId=OTVR7HND7MU6X&offerId=fakeOfferId&experienceId=EXC78P3VUPI4&iframeId=offer_fc7f02d4e07c4c74d0b1-0&displayMode=inline&widget=template&url=https%3A%2F%2Ftechcrunch.com
At the same time, the conflict and instability is having a big knock-on effect for investors, partners and would-be customers that want to do business in the region, something that is impacting both Israeli and Palestinian companies. (That’s not to mention the interruptions in supply chains and logistics, as well as even more basic needs.)
Some investors are even looking to step up by creating emergency impact funds specifically to fund startups that have had to pause their activities due to the situation.
Others claim the moment remains ripe for cyber in Israel from an investing standpoint.
“We are still seeing a lot of activity. The need for cybersecurity hasn’t decreased given what is happening. Actually, it’s the other way around. With the advancement of new systems and geopolitical changes, there are even more needs for cybersecurity,” said Lior Simon, a general partner at Cyberstarts, a specialist cyber investor in the region. “Funding and investments are continuing to be made, and we are getting pinged by several investors asking what is happening and what is coming out to market.”
Aside from this, there is also the image of public perception outside of the region : As shown by the recent blow-up around Web Summit and the departure of the founder from executive roles after comments he made about the situation, and a backlash against that, some of the most public efforts of energy that we are seeing coming out of the Israeli tech ecosystem right now are focused on that conflict and how that’s being represented. M&A does not feel like a top of mind concern in that regard.
To be clear, this deal for Talon, along with the one for Dig, were very much already in the works before the surprise attack by Hamas. That they managed to close them during the turmoil is notable, but what remains to be seen are how M&A activities, along with funding, and business for startups overall, will develop as the conflict wages on.