Varonis Systems (NASDAQ:VNRS) is considering a sale of its business after fielding takeover interest from major private equity firms including Blackstone, Thoma Bravo, and Vista Equity Partners, Bloomberg reported, with Wedbush analysts saying a deal would make strategic sense given the cybersecurity company’s discounted valuation.
Varonis is working with advisers as it evaluates interest from financial buyers, according to the Bloomberg report.
Wedbush analyst Dan Ives, who maintains an Outperform rating and $37 price target on the stock, has the company has been on his M&A watchlist and believes it is undervalued relative to its peers.
Varonis shares have been under pressure after falling roughly 30% earlier this year, hurt by competitive threats from AI labs Anthropic and OpenAI, which each launched vulnerability detection and patching tools that raised concerns about disruption to Varonis’ software-as-a-service model. The company also faces competition from cybersecurity platform providers Palo Alto Networks and CrowdStrike.
Despite the selloff, Wedbush noted the stock still trades at a significant discount to its peer group, with Varonis fetching approximately 3.9 times 2027 enterprise value-to-revenue versus the roughly 7.3 times multiple commanded by comparable cybersecurity names, a gap the analyst said makes the company a prime acquisition candidate.
Wedbush said each of the private equity suitors named by Bloomberg has extensive software and cybersecurity portfolios and would be positioned to bundle Varonis’ capabilities into existing product suites for additional upsell and cross-sell opportunities.
Ives noted that while Varonis has made progress with its SaaS-first model and pipeline development, the company has faced challenges converting deals as competition in the managed detection, data, and response market intensifies. Varonis has increasingly leaned on AI and machine learning to power user behavior analysis and threat modelling, capabilities Wedbush said should improve the value of its portfolio and expand its addressable market ahead of any potential transaction.
“We believe that we are still in the early stages of consolidation within the space,” Wedbush said, adding that more customers are seeking all-in-one platform approaches rather than purchasing multiple products across vendors.
Shares of Varonis were on track to finish nearly 8% higher on Tuesday.
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