Activity and Opportunities in CyberSecurity - 14th Jun 2017

By: James Baird

2016 was a record year for growth in CyberSecurity – largely in response to a record year for hackers in 2015, a trend which continued into 2016, and continues into 2017. It seems like every other day that news breaks of another data security breach at a prominent company. To be precise, 980 major data breaches were reported in 2016, an increase of 25% against those reported in 2015. Organisations like the Institute of Directors have hosted a swathe of events targeted at bringing the need for CyberSecurity home to decision makers, even for smaller businesses.

2016 saw over £15.5 billion spent on M&A transactions in CyberSecurity, over 137 transactions. Nearly £8 billion of this spend came from private equity, suggesting that analysts are clearly of the view that the CyberSecurtiy market is likely to grow. The number of M&A transactions shows a steady pattern of increase, as shown above below.

In addition to this, close to £3.5 billion was invested into the CyberSecurity sector during 2016 across 268 deals. 43% of these deals were Series A (early stage), with a median deal size of £4 million. The remainder of the deals were later stage, with a median deal size of £12 million, the highest value financing deal being for £150 million. These figures represent a steady increase, both in volume and quantum of deals, since 2010, as shown in the graph below.

It is also worth noting that both financing and M&A activity in the CyberSecurity industry has generally been spread across all sectors of the industry, with a slight bias towards the financing of specialised threat analysis and protection, and data security, and a slight bias towards risk & compliance and identity & access management in M&A activity. The full analysis is shown below, along with 2015 comparatives.

Looking ahead to what remains of 2017, and on into 2018, it is likely that significant interest will remain in the CyberSecurity industry. We have seen acquisitions by a number of established companies (like Symantec) of smaller, more niche companies, often with high valuations. Almost £11 billion has been invested into CyberSecurtiy companies over the last 5 years, over £8.5 billion in the last three years, and a peak of close to £3.5 billion during 2016, trend analysis would suggest that CyberSecurity investment during 2017 is likely to be in the order of £4-4.5 billion.

With the ongoing trend of high profile data breaches, CyberSecurity is likely to remain at the forefront of many organisations, and is therefore likely to present significant opportunity on an ongoing basis, both for M&A and financing activities.

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