DC Discusses: Cybersecurity M&A resurgence driven by strategic buyers and companies in priority capability areas

Cybersecurity M&A deals announced ($bn)

Source: Mergermarket, Pitchbook, Copyright © 2023 S&P Global Market Intelligence [and its affiliates, as applicable] (Transactions with disclosed deal values announced within the cybersecurity industry between January 1 - November 5 2023)

Cybersecurity M&A deals announced with transaction values >$200m

Source: Mergermarket, Pitchbook, Copyright © 2023 S&P Global Market Intelligence [and its affiliates, as applicable] (Transactions with disclosed deal values announced equal to and above USD 200m within the Cybersecurity industry between January 1 2023 - November 5 2023)

Large strategic buyers in the cybersecurity sector are, in our view, increasingly looking to execute M&A transactions, with some, including Palo Alto Networks and Accenture having recently announced multiple acquisitions (see ‘Recent cybersecurity M&A transactions by large strategic buyers’ below):

• On the technology side, recent M&A activity has been robust across multiple segments within the broader cybersecurity ecosystem, including cloud data (Dig[i]), cloud applications (Bionic, Ermetic[ii]), SaaS / web applications (Atmosec[iii], Talon[iv]), network / zero trust (Perimeter 81[v]), OT / ICS (Verve[vi]), email (Tessian[vii]), SIEM (Splunk[viii]), SOAR (Revelstoke[ix])
• Managed and professional services, we’ve seen increased interest in adding scale, technology-enabled efficiency, gross margin expansion (again, Revelstoke) and accelerating international growth (Accenture’s acquisition of Innotec[x] in Spain and MNEMO Mexico[xi])

We believe strategic buyers are increasingly stepping in and executing M&A, given the pullback in venture funding[xii]. While private equity remains active and interested in cybersecurity, private equity buyers and PE-backed strategics face increasing challenges given the higher interest rates environment and the potential to trigger re-pricing of existing debt.

We have seen many sizeable deals recently, with disclosed values and premium valuation multiples providing an indication of health versus more distressed situations.

While, in our view, the market has normalized from peak valuation levels seen in 2021, companies performing well and positioned in priority capability areas can still attract premium revenue or ARR multiples.

Recent cybersecurity M&A transactions by large strategic buyers

 'Premium / (Discount) to last round post money valuation or share price one month prior to closing, where applicable

To find out more about any of the themes discussed, get in touch with the US cybersecurity team - Eric Wagner, Matt Fiore, and Ryan Frew

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DC Advisory has prepared this material solely for informational purposes and it is not a research report. This material does not constitute or form part of, and should not be construed as, an offer to sell, or a solicitation of any offer to buy, or any recommendation with respect to, any securities.

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Sources 

[i]   https://www.paloaltonetworks.com/company/press/2023/palo-alto-networks--announces-intent-to-acquire-cloud-security-start-up-dig-security

[ii]  https://investors.tenable.com/news-releases/news-release-details/tenable-increases-focus-cloud-security-agreement-acquire-cnapp

[iii]   https://www.checkpoint.com/press-releases/check-point-to-acquire-atmosec-an-innovative-saas-security-vendor-as-part-of-its-strategy-to-deliver-the-most-secure-sase-solution/

[iv]   https://www.paloaltonetworks.com/company/press/2023/palo-alto-networks--announces-intent-to-acquire-enterprise-browser-start-up-talon-cyber-security

[v] https://www.checkpoint.com/press-releases/check-point-to-acquire-perimeter-81-to-deliver-the-fastest-and-most-secure-sase-solution-in-the-industry/

[vi] https://www.rockwellautomation.com/en-us/company/news/press-releases/Rockwell-Automation-Signs-Agreement-to-Acquire-Verve-Industrial-Protection.html

[vii]   https://www.proofpoint.com/us/newsroom/press-releases/proofpoint-signs-definitive-agreement-acquire-tessian

[viii]   https://www.splunk.com/en_us/newsroom/press-releases/2023/cisco-to-acquire-splunk-to-help-make-organizations-more-secure-and-resilient-in-an-ai-powered-world.html

[ix]     https://arcticwolf.com/resources/press-releases/arctic-wolf-announces-intent-to-acquire-revelstoke/

[x] https://newsroom.accenture.com/news/2023/accenture-acquires-innotec-security-spain-based-leading-cybersecurity-company

[xi] https://newsroom.accenture.com/news/2023/accenture-expands-cybersecurity-services-capabilities-in-latin-america-with-acquisition-of-mnemo-mexico

[xii] https://news.crunchbase.com/cybersecurity/vc-funding-q3-bounce-back-2023/#:~:text=Startups%20%E2%80%A2%20Venture-,Cybersecurity%20Funding%20Sees%20Slight%20Bounce%20Back%20From,But%20Still%20Down%20From%202022&text=Venture%20funding%20to%20cybersecurity%20startups,down%2030%25%20year%20to%20year.

[xiii] https://www.channelfutures.com/mergers-and-acquisitions/palo-alto-networks-acquiring-talon-cyber-security-in-reported-625-million-deal

[xiv] 'https://siliconangle.com/2023/10/31/palo-alto-networks-acquires-dig-security-reported-400m/

[xv] https://www.bankinfosecurity.com/proofpoint-to-buy-tessian-to-infuse-email-protection-ai-a-23432

[xvi]https://www.reuters.com/markets/deals/ciscos-28-billion-splunk-deal-may-ignite-software-deal-frenzy-2023-09-26/

[xvii] https://www.calcalistech.com/ctechnews/article/hyquwtlka#:~:text=Cybersecurity%20giant%20CrowdStrike%20is%20acquiring,announced%20the%20deal%20later%20Tuesday

[xviii] 'https://www.tenable.com/press-releases/tenable-announces-intent-to-acquire-ermetic

[xix] 'https://www.checkpoint.com/press-releases/check-point-to-acquire-atmosec-an-innovative-saas-security-vendor-as-part-of-its-strategy-to-deliver-the-most-secure-sase-solution/

[xx] 'https://www.calcalistech.com/ctechnews/article/sj02hwf22#

[xxi] 'https://techcrunch.com/2023/07/25/thales-enters-app-security-market-with-3-6b-imperva-acquisition/