The recent completion of Cohesity’s acquisition of Veritas NetBackup marks a significant milestone in the data protection industry. It creates what Cohesity claims to be the world’s largest data protection software provider by market share. Announced ten months ago, the acquisition brings together Cohesity’s modern approach to data management with Veritas’s extensive customer base and traditional workload support. This strategic move aims to enhance their combined capabilities and market presence, establishing a new powerhouse in the data protection landscape that can address emerging challenges and opportunities in the realm of cybersecurity and data management.
A New Data Protection Giant
The completion of this merger now allows the combined entity to serve over 12,000 customers, which includes more than 85 of the Fortune 100 and nearly 70 percent of the Global 500. Veritas has contributed over 10,000 customers to this notable total. However, it is important to note that certain products such as Veritas Backup Exec, data compliance, and InfoScale storage management were spun off into a new company called Arctera, under the leadership of CEO Lawrence Wong. This move enables the new company to focus on specific product lines while allowing Cohesity and Veritas to streamline their core data protection services.
Cohesity CEO and President Sanjay Poonen emphasized that this integration aligns seamlessly with Cohesity’s mission to protect, secure, and derive insights from global data. By merging Cohesity’s scale-out architecture and advanced AI and security functions with Veritas’s broad workload support, the new entity promises to offer added value to its users. Poonen reassured customers that existing products from both companies would continue to be supported, ensuring a smooth transition with no customer left behind. This customer-centric approach highlights the company’s commitment to maintaining and enhancing client relationships amid significant operational changes.
Industry Perspectives and Market Impact
Industry perspectives underscore this merger’s importance in addressing the increasing data protection needs against cyber threats. Futurum CEO Daniel Newman emphasized that the merger is the largest in the data protection space to date, acknowledging its scale and potential impact. He noted that the combined entity addresses the market’s need to go beyond traditional data backup to enhance data security and resilience, crucial in an era where cyber threats are becoming more sophisticated and frequent. Newman highlighted that Cohesity’s expanded support for various workloads, coupled with top-tier security and extensive partner ecosystems, positions it effectively to help CIOs globally leverage AI and transform organizational data into strategic assets.
Cohesity, founded in 2013, has rapidly ascended in the data protection sector, surpassing $1.5 billion in annual revenue faster than any other company in the field. For fiscal year 2024, the pro forma adjusted revenue for the merged entity exceeded $1.7 billion, with annual recurring revenue (ARR) reaching $1.5 billion and a 28 percent adjusted cash EBITDA margin. When comparing these figures to competitors such as Veeam, which achieved similar revenue by 2021, Commvault with $839.2 million, and Rubrik with $627.9 million, the new Cohesity-Veritas combination stands out as a formidable force in the industry. This robust financial performance underscores the strategic advantages and market potential of the merger.
Financial and Strategic Implications
Analysts indicate that the acquisition positions Cohesity as either a tie or a close runner-up to Veeam in market share for data protection, with both companies reporting ARR levels around $1.7 billion. Cohesity managed to gather approximately $3 billion for the acquisition through equity and debt from investors including Haveli Investments, Premji Invest, and Madrona, which was crucial to the transaction’s success. As a result, the newly formed Cohesity-Veritas data protection business now stands valued at $7 billion, reflecting its substantial market presence and potential for future growth.
Specifically, Ader of William Blair stressed the likelihood of double-digit ARR growth in 2025, supported by Cohesity’s strategic plans. He mentioned that Cohesity’s strategy involves facilitating an easy transition for Veritas customers to migrate to its more modern platform, although the transition is not mandatory. This flexibility allows Veritas customers to evaluate and adapt to the new platform at their own pace. For Veritas’s previous owner Carlyle, which acquired it from Symantec for $7.4 billion in 2015, the acquisition by Cohesity has not yet yielded the full financial return. However, the spun-off Arctera retained an ownership structure similar to its predecessor, albeit with a new capital framework post-divestiture.
Funding and Investor Support
The acquisition funding involved a Series H round led by Haveli Investments and a Term Loan B facility from JP Morgan. Cohesity allocated Series G shares directly to Carlyle as part of the purchase price, effectively involving Carlyle in the newly merged entity’s financial structure. This strategic financing approach ensured that the acquisition was well-supported and that all key stakeholders were aligned with the merger’s long-term objectives and anticipated benefits.
Nvidia’s support for Cohesity is particularly notable, reflecting its commitment to advancing next-gen technology. Nvidia contributed to Cohesity’s F round funding and has shown eagerness to support Cohesity’s development of next-gen AI products. The integration of Nvidia AI Enterprise into Cohesity’s offerings exemplifies this collaboration, showcasing the adoption of advanced AI technology to drive business value from secured data. This partnership sets a precedent for future tech-driven innovations in the data protection industry, highlighting the increasing convergence of data protection and AI capabilities.
Enhanced Capabilities and Market Position
Among its new capabilities, Cohesity claims to support the broadest range of workloads within a highly scalable modern architecture. This positioning aligns Cohesity alongside other significant players in the data protection and cyber resiliency domain, such as Veeam, Rubrik, IBM, Dell, and Commvault. The strategic merger of Cohesity and Veritas has not gone unnoticed by industry commentators. Commvault’s chief customer officer, Sarv Saravanan, implied that some mergers may prioritize acquiring customers over delivering immediate value. This perspective contrasts with Commvault’s recent technology-oriented acquisitions of Appranix and Clumio, aimed specifically at enhancing cyber resilience.
Furthermore, Ader remarked that while Cohesity appears committed to customer transition facilitation without coercion, a fundamental motivation is to encourage existing Veritas customers to adopt Cohesity’s newer platform. He highlighted the potential market impact this strategy might have, noting that it could become more challenging for other vendors like Commvault to gain market share at Veritas’s expense, given this robust integration. This dynamic underscores the competitive nature of the data protection landscape and the emphasis on strategic customer transitions to foster long-term loyalty and growth.
Future Prospects and Customer Transition
Cohesity’s acquisition of Veritas NetBackup has just been completed, marking a notable milestone in the data protection sector. This merger has reportedly created the world’s largest data protection software provider by market share, according to Cohesity. Announced ten months ago, this acquisition melds Cohesity’s forward-thinking approach to data management with Veritas’s vast customer base and traditional workload support. This strategic alliance aims to bolster their combined capabilities and significantly enhance their market presence. Together, they aspire to establish a new dominant force in the data protection industry, capable of addressing the latest challenges and opportunities in cybersecurity and data management. By uniting advanced technologies with a robust foundation, Cohesity and Veritas are set to deliver comprehensive solutions that will cater to evolving needs, thereby setting new industry standards and reinforcing their commitment to innovation and security in the digital era. This merger represents a giant leap forward, promising substantial benefits for both companies and their customers.
