WatchGuard seeks to accelerate expansion into MDR market with ActZero acquisition

WatchGuard Technologies Inc., a manufacturer of integrated threat management software, devices and services, today said it has acquired ActZero Inc., a provider of managed detection and response services, for an undisclosed amount.

WatchGuard said the deal will accelerate its expansion into the MDR market, which began in 2023. Both companies primarily serve managed service providers who resell services to their clients.

ActZero’s technology and people will form the core of the WatchGuard MDR product line. WatchGuard plans to merge its MDR offerings with ActZero’s, but says the integration should not impact customers.

“We typically acquire companies to integrate into our platform. This is backward integration,” said WatchGuard CEO Prakash Panjwani. “We will integrate into their platform within the first 90 days so partners can use it immediately.”

ActZero has focused exclusively on the MDR market since its founding in 2019. The company has raised more than $40 million, according to market intelligence service Crunchbase Inc. Panjwani said the acquired company is known for its strong customer acquisition and service capabilities and for its platform’s effective use of machine learning to reduce false positives and noise.

“They have a good understanding of process, people and platform services,” he said. “They bring that maturity directly to us.” WatchGuard built its own MDR business “organically, and that’s moving us forward.”

Panjwani also praised ActZero’s open architecture, which provides integration with endpoint detection and response software from CrowdStrike Holdings Inc. and Microsoft Corp. This strategy is consistent with WatchGuard’s strategy. “We would definitely open up our MDR service,” Panjwani said. “They got us there 24 months early.”

ActZero’s focus on MSPs was another selling point, Panjwani said. Unlike enterprises, MSPs typically sell security services to a large number of small and medium-sized clients. “Automation and scalability are critical because they are dealing with so many users,” he said.

As is consistency. MDR providers that communicate directly with end users create headaches for service providers. “Many traditional MDR players are moving directly to the end user,” the CEO said. “We make it very clear that the partner owns the end user and we work on their behalf.”

This is WatchGuard’s ninth acquisition and sixth since 2016. Founded in 1996, the company went public in 1999 but struggled with product and marketing execution.

In 2006, it was acquired by private equity firms Vector Capital Management LP and Francisco Partners Management LP, which installed new management. Vector Capital will acquire a majority stake in 2022. The company serves more than 17,000 MSP customers and says it has sold nearly 1 million all-in-one threat management appliances worldwide.

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