Barry Jaber director of advisory/transaction services, PwC
PwC's latest M&A report into global cyber security, “Decoding Deals,” shows that activity was strong in 2011, with deal value and volume showing significant growth from 2010. Deal activity in 2012 and beyond will likely be underpinned by three key factors.
First, the cyber security market is expected to continue to grow as organizations spend more on security products and services given growing threats and vulnerabilities. The relatively high market growth versus other industries will likely attract investment and help maintain current deal valuations.Second, a large number of active buyers see cyber security as a strategic priority market, and they are looking to grow their cyber security capabilities. Buyers include technology, IT and defense companies, many of which have healthy balance sheets providing firepower for deals.
Finally, active sellers, including private equity firms, may look to trade sales and secondary buyouts to exit assets, particularly if the IPO market remains subdued.
John Doyle, managing director, Peachtree Capital Advisors
With mobile and cloud-based technologies innovating at a dizzying pace, valuable data is increasingly being stored online, and cyber threats are likewise growing. Although security will always lag behind innovation, companies have nonetheless allocated big dollars toward protecting their information.
These developments have created major M&A and investment opportunities. Just recently, Blue Coat was acquired for $1.3 billion, and Rapid7 and Cyber-Ark raised a combined $90 million.
Despite the hoopla, however, M&A in cyber security will not skyrocket in 2012. For one, investors are unlikely to so quickly exit new investments. Secondly, the sector will be hard-pressed to maintain – never mind exceed – its recent rate of blockbuster deals, which have driven M&A growth.
Rest assured, cyber security will remain as a critical area of technology development in 2012, and a there may be a few defense contractors making small cyber pickups. Just don't expect M&A to shoot through the roof.