US companies remained the most active investors in the cybersecurity technology space during 2014–2018, according to GlobalData, a US-based data and analytics company. But this may be masking their innovation as they use acquisitions in place of R&D.
Of the top five acquirers in terms of number of acquisitions, the top three were headquartered in the US, with the UK-based Sophos and Canadian firm Blackberry also featuring among the top five. The three American companies, Symantec, Palo Alto Networks and Proofpoint, undertook seven acquisitions each in the cybersecurity space during 2014–2018, while Sophos acquired six companies and Blackberry acquired five companies during the period.
Jonathan Simnett (pictured) from European tech M&A experts Hampleton Partners says this is to be expected.
“The results of this report GlobalData report accord with Hampleton Partners’ ongoing research that identifies global digitization, new regulation, high profile incidents and new technologies driving cybersecurity M&A to record highs. By the beginning of 2019 cybersecurity M&A volume had already reached the full year combined levels from 2016 and 2017 with American buyers dominating.
For instance, the full year 2018 saw nine big ticket $500m+ deals from buyers, such as Thoma Bravo, Cisco, RELX, AT&T and Francisco Partners, which generated attention to the sector and raised valuations. Overall, market valuations reached a new record of 5.6x sales (trailing 30-month median) with Symantec, J2 Global and Accenture being the three biggest buyers overall during 2018, he says.
“Clearly the need to ensure cybersecurity is a top priority for end users and so the M&A market in cyber security will remain strong with multiples likely to continue their upward climb. But it is a mistake to confuse American firms’ propensity to acquire security assets with technology innovation in the US. These firms are using M&A to substitute for their own R&D with the significant development work in many cases being done in emerging technology powerhouses where Israel remains pre-eminent.”
Jonathan Simnett is a panelist at the Managed Services Summit on Wednesday 18 September, where he will address the issues of growth in the industry and help examine the pressures and pain points in acquisitions. Register here for the summit
