Race to lock down cyber security vendors intensifies as more technologies at risk

The cyber security sector’s largest-ever deal, specifically Broadcom’s landmark acquisition of Symantec for $10.7 billion, set the tone for an uptick in transaction volume and continuously strong valuations. That’s according to Hampleton Partners’ latest analysis of global cyber security mergers and acquisitions (M&A) activity.

The company’s Cyber Security M&A report highlights the popularity of cyber security vendors as all industries seek protection from cyber attacks. Cyber security transaction volume rose by 15% in the second half of 2019 compared to that of 2017. Valuations have also remained healthy, with EV/S multiples consistently trading around 5x for the past four years, which is significantly above the 3x valuations seen in the wider enterprise software space.

Hampleton Partners has cited three key trends impacting the race to secure cyber security vendors: an exponential increase in the number of devices connected to enterprise Internet of Things (IoT) networks (providing potential entry points for cyber attackers), growing volumes of personal data that needs to be secured and mounting regulatory and financial penalties for cyber insecurity.

Axel Brill, director of Hampleton Partners, said: “The number of cyber attacks, as well as their complexity, is growing rapidly. Cyber security vendors will have to move quickly to keep ahead of malware and hackers. Cyber attacks are some of the most dangerous threats for businesses across all sectors and industries, demanding management time and increased investment in technologies like Artificial Intelligence (AI) to protect against vulnerabilities. There’s no doubt that AI-focused cyber security vendors will be the most sought-after future M&A targets in this sector.”

Palo Alto Networks takes top spot

The Top Three acquirers in cyber security over the past 30 months were Palo Alto Networks (seven deals), J2 Global (six deals) and Thoma Bravo (six deals).

Palo Alto Networks is the most active acquirer on an annual basis for the second year in a row (as measured by number of acquisitions completed in the last 30 months). After completing three transactions for a combined $563 million last year, the business spent nearly that amount on acquiring security automation and orchestration software provider Demisto for a total of $560 million in February. In May, the company also acquired enterprise container and cloud security software provider Twistlock for $410 million.

Overall, the company nearly doubled its M&A spending year-on-year, spending almost $1.1 billion so far this year on a total of four cyber security transactions.

In addition to being the most prolific acquirer, Palo Alto Networks has also paid some of the highest valuations disclosed in the space, paying 46.7x and 27.3x EV/S for Demisto and Twistlock respectively.

Palo Alto Networks also paid 15x EV/S to acquire Zingbox, the AI-based IoT device management and threat system that analyses and detects threats by identifying behavioural anomalies.

*Download the full Hampleton Partners Cyber Security M&A Report by accessing this link: https://www.hampletonpartners.com/reports/cybersecurity-report/

About the Author
Brian Sims BA (Hons) Hon FSyI, Editor, Risk UK (Pro-Activ Publications) Beginning his career in professional journalism at The Builder Group in March 1992, Brian was appointed Editor of Security Management Today in November 2000 having spent eight years in engineering journalism across two titles: Building Services Journal and Light & Lighting. In 2005, Brian received the BSIA Chairman’s Award for Promoting The Security Industry and, a year later, the Skills for Security Special Award for an Outstanding Contribution to the Security Business Sector. In 2008, Brian was The Security Institute’s nomination for the Association of Security Consultants’ highly prestigious Imbert Prize and, in 2013, was a nominated finalist for the Institute's George van Schalkwyk Award. An Honorary Fellow of The Security Institute, Brian serves as a Judge for the BSIA’s Security Personnel of the Year Awards and the Securitas Good Customer Award. Between 2008 and 2014, Brian pioneered the use of digital media across the security sector, including webinars and Audio Shows. Brian’s actively involved in 50-plus security groups on LinkedIn and hosts the popular Risk UK Twitter site. Brian is a frequent speaker on the conference circuit. He has organised and chaired conference programmes for both IFSEC International and ASIS International and has been published in the national media. Brian was appointed Editor of Risk UK at Pro-Activ Publications in July 2014 and as Editor of The Paper (Pro-Activ Publications' dedicated business newspaper for security professionals) in September 2015. Brian was appointed Editor of Risk Xtra at Pro-Activ Publications in May 2018.

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