June 9, 2023
As we rounded out our list, we noticed that a good portion of deals involved cybersecurity organizations. That shouldn’t be a surprise, said Rich Snipes, managing director of technology at digital transformation firm West Monroe. Although there was a slowdown of M&A activity by the second half of 2022 – due to rising interest rates, inflation and recession fears – the cybersecurity world has been a bit more insulated from those things, Snipes said.
West Monroe’s Rich Snipes
“There are lots of companies out there that are trying to transform themselves to become more digital,” Snipes said. “As you do that, you inevitably end up in a position where you suddenly have all these digital assets that now need to be protected. Advancing and maturing your cybersecurity program and strategy and capability is super important. Also, the geopolitical instability … contributes to this larger slowdown, but it’s also a tailwind on the cybersecurity side.”
Moreover, IoT and AI are what he calls “fast-moving trains” that have many more endpoints that are important and that need to be protected. Additionally, bad actors can use AI to expand the scope and complexity of some threats. These are all opportunities for cybersecurity companies.
In addition, legacy players are trying to evolve their product offering capabilities and their business models to respond to the shifts and demand.
All of that growth doesn’t mean cybersecurity organizations have the easiest path.
“While there are lots of opportunities for investors, there’s also lots of competition,” Snipes said. “I wouldn’t say it’s a foolproof industry. There’s definitely competition out there, too.”
Sky-high valuation also exists. There’s some pause from investors who don’t want to overpay for an asset. However, investors understand that cybersecurity is still a good business decision.
“You’ve got all these startups in the space that end up being ripe acquisition targets, which can … help if you have a good platform on which to build,” Snipes said. “It’s a really exciting time for sure.”
If you didn’t catch our previous roundup, you can find it here.
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