Deal (of the Day): SurfControl buys Black Spider

Following this M&A stuff is becoming a full time job. This morning, SurfControl acquired Black Spider (link here), which is a content security service provider that does email and web filtering. Postini, MessageLabs, and ScanSafe are their top competitors. I had decided not to do a separate piece, but then I heard from a friend of mine who is over in the UK and he mentioned how everyone over there was fired up about it. Sometimes I need to remember that we all live in a global village.

The specifics of the deal are pretty straight forward. SurfControl pays US$36 million and gains entrance into the managed service business. Black Spider gets an exit, and worldwide distribution given their real strength was in EMEA. As an added bonus, Surf Control can probably sell the blackspider.com domain name to Columbia Pictures for a pretty penny (if you've seen the Spider-Man3 trailer, you know what I'm talking about).

To be clear, Black Spider was small with about 1200 customers and doing less than $5 million in revenues, but that doesn't matter. They'll fit into SurfControl like a glove. If a customer wants a service option, SurfControl doesn't have to walk away from the deal (or the customer). It's a pretty compelling way to play into the inevitable trend that most customers will want to filter email and web traffic in the network (see Incite on Content Security here).

And as opposed to other deals announced this week, $36 million is very affordable for SurfControl.

Yet, there are always challenges every deal, and with this one comes the challenge of channel conflict. It needs to be very clear to the SurfControl field force when they should look to sell a service or an appliance. The worst case scenario is that they try to sell an appliance, and only when the client says a resolute NO do they move towards the service. By then, Postini or MessageLabs is in the house and will win the business.

You also will have a potential area of conflict around their VARs trying to get into the MSS business themselves. When I was in the business, I saw a lot of that and it's only been increasing. You know, a VAR buys 3 Barracuda's and bingo, they are in the email security business.

But for the most part, this deal makes perfect sense and is a precursor to maybe some bigger folks that offer appliances moving to take out the leading service providers. McAfee already sells Postini's stuff and IBM is very close to MessageLabs. So it wouldn't surprise me to see more deals in the space sooner rather than later.