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Cybersecurity Mergers, Acquisitions: MSSP Activity Remains Strong

Managed security service providers (MSSPs) ranked among the top sectors for merger and acquisition (M&A) activity in Q3 2018, according to Momentum Cybersecurity’s latest tracking report.

Of the total M&A cybersecurity action for the period, most involved identity and access management companies, followed by those engaged in security consulting, risk and compliance, and MSSPs. Overall, M&A deal size continued to increase while financing activity remained strong.

By the close of the quarter, strategic deal making had accelerated, with 137 transactions deploying $6.4B across M&A (38 transactions valued at $5 billion) and financing (99 transactions worth $1.4B), Momentum said in its 179-page report, Cybersecurity Market Review Q3 2018. Deal value for the period increased 204 percent from the prior quarter.

Here’s some data highlights:

M&A activity:

  • Q3 2018 M&A activity featured six transactions valued at more than $100M.
  • Over the last eight quarters financial and strategic buyers have completed $36.8B in M&A transactions.

    • Key players/deals:

    • Cisco acquires Duo Security;
    • Bomgar/BeyondTrust merger;
    • AT&T acquires AlienVault;
    • Allstate acquires InfoArmor; and
    • Thoma Bravo acquires Centrify.
    • Those deals accounted for 92% of total Q3 2018 disclosed deal value, with a total of $4.6B.

      • Financing activity:

      • 54% of deals were early stage (seed to Series A), with a median amount raised of $4M. The remainder were late-stage (Series B+) with a median amount raised of $18M.
      • The most active sectors for financing activity in Q3 2018 included risk & compliance (15), identity & access management (14), security operations/incident response/threat Intelligence (13) & network & infrastructure security (13).

        • Market sizes of key industry sectors:

        • Data-centric security market size is estimated to grow from $2.1B in 2017 to $5.83B by 2022 (CAGR of 23.1%).
        • Global cloud access security brokers market is projected to grow from $3.3B in 2015 to $7.5B by 2020 (CAGR of 17.6%.
        • Network and infrastructure security technology market size is estimated to grow from $1.0B in 2016 to $2.1B by 2021 (CAGR of 15.1%).
        • Security analytics market is estimated to grow from $2.8B in 2016 to $9.4B by 2021 (CAGR of 27.1%).
        • Privileged identity management is expected to grow to $3.8B by 2021 (CAGR of 33%).
        • Global endpoint detection & response market is expected to reach approximately $1.5 billion by 2020.

          • Miscellaneous:

          • The average and median enterprise value for cybersecurity transactions since 2010 was $227M and $42M, respectively.
          • M&A transactions in cybersecurity have been below $100M 66.8% of the time.
          • Transactions greater than $1B are rare, representing 5% of all deals.
          • The $4.4B raised across 307 transactions through YTD 2018 outpaces the first three quarters of 2017 by $613M in funding volume.
          • Over the last eight quarters investors have poured $10.3B into cybersecurity. The $1.4B invested in Q3 2018 made it five of the past six quarters with over $1B invested.
            • D. Howard Kass

            D. Howard Kass is a contributing editor to MSSP Alert. He brings a career in journalism and market research to the role. He has served as CRN News Editor, Dataquest Channel Analyst, and West Coast Senior Contributing Editor at Channelnomics. As the CEO of The Viewpoint Group, he led groundbreaking market research.

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