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  • HelpSystems Buys GlobalScape For $217 Million For File Transfer Expansion

    August 17, 2020 Timothy Prickett Morgan

    Secure file transfer is a thing, particularly with companies working remotely, and this is why the investors behind the HelpSystems conglomerate are shelling out a whopping $217 million, or $9.50 per share, to buy a publicly traded rival in the secure managed file transfer tool arena called GlobalScape.

    The deal offered by HelpSystems and agreed to represents a 16 percent premium over the market capitalization of GlobalScape prior to the announcement of the acquisition, and the deal will be funded by cash on hand at HelpSystems plus new debt that is backed by Jefferies Finance and credit funds affiliated with Charlesbank Capital Partners. It is not clear how much is being offered in cash, but in the current environment, money is cheap to borrow and cash is king, so we expect it to be a very debt heavy deal.

    The lawyers are circling, with several firms specializing in class action lawsuits saying that they want to file to compel a better deal be made. In late 2017 through early 2019, the company’s shares were pretty steady at somewhere around $3.50 to $4.00 a share, or a third to half the market capitalization GlobalScape had before the deal was announced on July 17. But in early 2019, as the company’s profits nearly quadrupled, the company’s stock kissed $14.00 a share, and of course that was before the coronavirus pandemic hit and changed everything. The lawyers are just sore no one offered a deal back then when they might have been able to command a higher price than the $217 million being offered.

    GlobalScape was founded in 1996 in San Antonio by Matt Goulet, who was its president and chief executive officer. The company is public, so we know a bit more about it than we do with other HelpSystems acquisitions. This seems like a pretty good deal for a company that does around $10 million in sales a quarter and brings roughly a third of its revenue the bottom line here in 2020. That’s about as good as it gets in the software world. In fiscal 2019 ended in December, revenues were $40.3 million, up 17 percent, and net income was $13.2 million, a factor of 3.6X larger than the prior 2018 year. The growth has cooled off a bit in 2020, but that is to be expected, all things considered. The company had $12.5 million in the bank and clean books as the second quarter ended in June, and hence, this is a good time for HelpSystems and its backers to step in and acquire it.

    It has been a rough couple of years for GlobalScape on the financial and management front, even as the business has been growing.

    In August 2017, the company announced that its audit committee had been looking into “improper arrangements” with customers that overstated accounts receivables in 2016. The company was traded on the New York Stock Exchange at the time and was in the doghouse for filing its quarterly reports late as it went through its books with a fine-toothed comb. In February 2018, NYSE, which owns the American Stock Exchange, and GlobalScape worked out how it would get compliant and still keep trading, and that months its chief financial officer resigned. After the numbers were redone, the company posted some net losses, which were not the usual for GlobalScape, but in 2018 the company was focused on its Arcus Enhanced File Transfer cloud product and moved forward. It also bought a huge chunk of its shares off the market through a modified Dutch auction tender offer. In April 2019, as the company was getting itself back on track, Goulet died unexpectedly. This is a tragic event for any company, but particularly hard on relatively small companies, even if they are publicly traded. Maybe especially so. Current and past management and directors of GlobalScape held 33 percent of the shares, and approved the merger with HelpSystems (which is really an acquisition), which is expected to close in the third quarter.

    Of course, HelpSystems bought Linoma Software four years back for its GoAnywhere MFT product, and Mike Devine, vice president of the company, said that this acquisition will not in any way affect the GoAnywhere MFT business. “It is growing remarkably well and we will continue to invest in it aggressively,” Devine tells us.

    When we asked if this was a backdoor way for HelpSystems to go public – this is how Dell went public again through its VMware acquisition, so it is not a crazy idea to ask – Devine said quite the opposite was the plan, and that HelpSystems will remain private and GlobalScape will cease to be traded publicly and will be absorbed into the conglomerate.

    We wonder now if HelpSystems will, thanks to all of its acquisitions and organic growth, pass through $150 million or even maybe $200 million in sales after the GlobalScape deal closes. . . .

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    Tags: Tags: IBM i, Managed File Transfer

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    The Case For Implementing Exit Points

    By Rich Loeber

    Someone recently asked me if there was someplace on the Internet where they could see a case made for implementing exit points on their IBM i system. I was at a loss for a comprehensive source and this got me thinking that it might be a good idea to just create one here.

    Security exit points on the IBM i (and its predecessor OS/400) have been in existence since the mid-1990s. When the system was opened up to network access, the need for additional security over and above the standard IBM i OS security was apparent. IBM’s solution was to let their customers solve the issues on their own by giving them access to specific decision points in the various network server functions that were being rolled out. Server functions were being added to the IBM i OS to support network access to the system like FTP, ODBC, SQL, mapped drives in the IFS, file upload and download, remote command calls and a lot more. Since that time, even more network functions have been added along with related new exit points.

    To be fair and above board, I must also disclose here that my company, Kisco Information Systems, jumped on the exit point bandwagon right away when the exit points were initially rolled out. Since 1996 we have been selling a comprehensive general use exit point solution called SafeNet/i, now in its 11th release.

    The question I was asked was “Why does my shop need to implement exit point controls?” That is what I want to address here. I will do so by describing several cases where additional security is needed over and above the already excellent security features that are built into the IBM i OS.

    Case #1: The classic case for exit point implementation comes from the 5250 terminal application days. If you have a Payroll Application that runs on your IBM i and is maintained by one or more clerks, OS security has to give access to the payroll files for those clerks, but the application and terminal menu system can easily be used to restrict what operations they can do on the payroll master files. That access will probably grant then *USE access so they can update files and generate payroll checks and reports.

    The above scenario is secure from an application perspective, but you would never want your payroll clerk to be able to download the payroll master files and take them home on a USB drive, would you? An exit point implementation can prevent this access. The exit point process runs on top of the IBM i OS and can be used to restrict server functions by user profile, source IP address and even by objects accessed. This leaves the IBM i OS security intact for the 5250 terminal application and also prevents unauthorized access via the network connection.

    Case #2: Many IBM i shops have one or more “regular users” defined with *ALLOBJ access in their user profile. This can happen for lots of reasons and in many cases, it would take a very long time to correct. I never recommend granting *ALLOBJ access to regular users, but if your system has evolved with this issue, it cannot be fixed overnight. In many cases, the application itself is providing the security. The issue, however, is that these users literally have access to ALL OBJECTS on your system. With network access to your system, one of these users could easily download sensitive data from your system, including credit card information and customer identity information, and hide it on a USB drive and walk out the front door and nobody would be the wiser.

    An exit point implementation can address this issue. Using exit points, you can restrict object access by user profile even though the user is set up with *ALLOBJ. In fact, object access can even be restricted for the QSECOFR security user profile. This can help to protect your system from abuse by a user profile that has been granted more access rights than they really need.

    Case #3: Since the TCP/IP communications utility FTP was added to the IBM i OS, a very easy to use network application lets users interact with the IBM i system without using a 5250 interface. The FTP user can browse objects on your system and upload or download them. A talented FTP user and even execute IBM i commands through FTP. For some shops, you want a user to have these capabilities, but you wouldn’t want them granted on a broad basis.

    Exit points can help with this, too. First, you can easily restrict which user profiles are allowed to use FTP. Then, you can further restrict which FTP commands they are allowed to use letting them do a PUT, for example, but disallowing a GET. Then, you can even give the user contextual access rights by only allowing an FTP connection from a known and trusted IP address, such as an internal IP address. Then, if the user’s credentials are compromised, the FTP connection will still have to be established from a trusted source.

    To sum up: These are just a few examples of why IBM i shops should consider exit point implementation for additional security on your IBM i system. There are literally dozens of additional scenarios that can be described, but these should get you started on making a case for exit points. It is my belief that every IBM i shop should have some form of exit point controls in place in order to be secure. If you are interested, I can heartily recommend Kisco’s SafeNet/i software if you want to jump in and get started.

    If you have questions about details of this tip, feel free to contact me directly by email, download our FREE utilities, or visit our website for more information.

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TFH Volume: 30 Issue: 49

This Issue Sponsored By

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Table of Contents

  • Power To The Tenth Power
  • Digitally Transform Yourself Like Your Life Depends On It
  • Guru: Dynamic Arrays Come To RPG – The Next Part Of The Story
  • HelpSystems Buys GlobalScape For $217 Million For File Transfer Expansion
  • Accelerating DX Does Not Necessarily Mean Spending More Bucks

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