David Riemenschneider, M&A expert at Hampletons told the Managed Services and Hosting Summit in London, that there is a lot of interest in buying companies with expertise in security – either in network security or more specifically in IoT, especially automotive.
"We are seeing a lot of activity in security – the highest multiples for early stage companies. The buyers can be both large and small – it is a very diverse group, including automotive companies themselves who have not entered this sector before. It us any company concerned with data going back and forth, there is a security overlay. It is a very hot sector.”
The sorts of companies in demand are those with some level of differentiation. "Those exceptional, special companies are if you entering a unique area – drones for commercial use is one example. In security we are starting to see security embedded into these. Embedded functions in vehicle is getting high multiples because the technology is new."
"Small companies tend to have a small voice, and we are finding some, perhaps with only a few customers, who have a technology, and it is up to us, as advisors, or others to actually shout from the rooftops. Smaller companies tend to be where the innovation is coming from. Some won't survive, but the people migrate as they have a passion for the sector. The small sector – companies with even just £2m-£m sales is where the activity is right now."
In IoT and Industry 4.0, M&A is taking the place of R&D; even the larger companies are buying skills and technologies in rather than develop them in-house. Pre-revenue companies where someone has a good idea, are making a splash. IoT, cybersecurity and embedded experts are in short supply makes it a challenging environment, he says.