By Ramone Param, Director, Equiteq
We have released a summary of our detailed review of cybersecurity M&A and investment trends for owners of technology and consulting businesses.
- Strong demand for deal flow from cash-rich strategic buyers and private equity investors;
- Capital raised for investments was well above long-term averages;
- The Equiteq Cybersecurity Share Price Index rose c.44% over a two-year period, while the NASDAQ rose by 26%; and
- Notable M&A deals included Blackberry’s completed $1.4bn purchase of Cylance, as well as CACI’s acquisition of LGS Innovations and Mastodon Design for $750m and $225m respectively.
The global cybersecurity market is expected to grow rapidly over the coming years. Accelerating digital transformation of businesses across industries has opened new vulnerabilities with the continued shift to new cloud-based systems, as well as the rising adoption of mobile devices, social media platforms and advanced data analytics tools. Some new technologies such as artificial intelligence, machine learning and behavioral analytics are also being considered to protect against, identify and block cyber-attacks. However, the overall risk of cyber-threats is expected to rise with the proliferation of data.
M&A deal volumes and capital raises for FY 2017 to Q1 2019
Quarterly market data provides an indicative view of current investment trends, but it should be noted that we typically observe large changes in quarterly data which are not always reflective of long-term trends. In Q1 2019, capital raised for investments in the cybersecurity space remained above long-term averages. Deal flow dipped slightly, but was broadly in line with recent quarterly volumes. The rising demand for cybersecurity consulting and software solutions from cash-rich strategic buyers is positioned against a backdrop of acute shortages of cybersecurity professionals. Capital raises and deal activity is also being supported by strong demand from private equity firms bidding on the potential for stellar returns in the space.
In Q1 2019, the share prices of listed technology players rose strongly. This growth contrasted with broader equity market volatility through the second half of 2018, which was a period of elevated investor uncertainty. Listed cybersecurity players have experienced recent robust share price growth supported by strong performance from the likes of Proofpoint, CyberArk and OneSpan. The Equiteq Cybersecurity Share Price Index rose 13% in the first quarter of 2019 and achieved gains of just under 44% over a two-year period, while the NASDAQ rose by 26%.
The market outlook remains robust as investors continue to demonstrate strong interest in cybersecurity businesses. We are interested to see how cybersecurity solutions evolve with the increasing adoption of new disruptive technologies like advanced machine learning and smart connected systems. We will also be monitoring how the market responds to new regulations driven by expected fresh high-profile costly security breaches in both the private and public sector.
If you would like to enquire about receiving a full copy of the Cybersecurity Global M&A Report Q1 2019, or would like to discuss your current strategic objectives as a business owner or acquisition strategy as an acquirer, please get in touch.