MSSP M&A: Managed Security Service Provider Deals Nearly Triple in 2021

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The cybersecurity industry posted $77.5 billion in mergers and acquisitions (M&A) volume and $29 billion in private equity (PE) and venture capital (VC) investments for 2021, in what strategic advisor Momentum Cyber called a “landmark and record smashing year” led by security consulting and managed security service provider (MSSP) deals.

Among the largest M&A deals were investor group Advent International’s purchase of McAfee for $14.1 billion, private equity firm Thoma Bravo’s acquisition of Proofpoint for $12.3 billion and NortonLifeLock’s buyout of Avast for $8 billion. Security consulting (50) and MSSPs (48) continued to lead industry deal counts in 2021.

“We are entering a new age of cybersecurity risk that is testing our defenses across every commercial and government organization,” said Dave DeWalt, founder and managing director, Momentum Cyber and NightDragon Security. “It is the responsibility of defenders like us to keep investing in and nurturing innovation to combat this existential threat and ensure a safe and secure future for all.”

Related: See all MSSP M&A deals listed here, as tracked by MSSP Alert.

Momentum Cyber Research

Here are some additional highlights from the San Francisco-based Momentum’s newly released Cybersecurity Almanac 2022 tracking cybersecurity-directed investment activity in 2021:

M&A.

  • A total of 286 transactions for $77.5 billion in aggregate disclosed value.
  • 14 deals valued over $1 billion, the highest number of billion-dollar-plus deals to date.
  • Security consulting (50) and MSSPs (48) continue to lead industry deal counts.
  • SecOps/ IR/threat intel experienced 171% YoY increase, the largest of any sector.

Total investment value.

  • Total investment into cybersecurity more than doubled in 2021 over the previous year.
  • Investors spent $29.3 billion in total venture capital and PE financing across 1,000+ deals, up from $12.4 billion in 2020.
  • Risk and compliance was the most active sector in financing with 170 raises.
  • Of the 1,042 total transactions, 82 were greater than $100 million.
  • Total financing value was up 136% over the year prior.
  • $119 million in disclosed M&A value.

IPO activity and valuations.

  • More than 30 unicorns in 2021 versus 6 in 2020, with valuations at record levels.
  • Major IPOs included KnowBe4, Darktrace, SentinelOne, Riskified and ForgeRock, totaling $2.2 billion in gross IPO proceeds.
  • Cybersecurity stocks consistently performed in line with the S&P 500 while outperforming the NASDAQ.
  • 5 Cybersecurity IPOs in 2021 (following 3 in 2020), with the average IPO raising $444M.
  • Average revenue multiple at IPO was 28.2x.

Trends and predictions:

  • Cybersecurity’s emerging relationship with cryptocurrency and blockchain.
  • DevOps shift-left with a focus on catering to developers, managed detection and response.
  • Zero trust’s continued attention.
  • An expanding focus on industrial control systems and operational technology as industrial security grows.
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