Cyber-security spending is expected to reach $1 trillion by 2022 – spurring mergers & IPO

Cyber-security spending is expected to reach $1 trillion over the next five years, according to recent market reports. With the cyber-security industry continuing with merger deals because of private equity buyers looking for cash-generating companies and acquiring smaller start-ups for their technology or in-demand security engineers, the dynamic to drive demand for security vendors continues to open the door for new startup companies and growth for established firms. With a no one-size-fits-all when it comes to security needs, cyber-security vendors have different types of expertise, ranging from email security to anti-virus software to cloud security to Industrial Control System security. With merger and acquisitions on the rise, investors that are actively looking to acquire companies should do their due diligence to ensure that any deal provides a Return on Investment for all stakeholders. With less financial visibility into these cyber-security companies, how do investors rate performance of an acquisition target.

Leaders in this deal making -the U.S. followed by the U.K. with a distant 3rd place held by Canada.

The cyber-security sector is in environment that is a perfect storm of high demand for services, that is constrained by the supply of talent, and an ever-evolving product/customer need. This makes it one of the more attractive areas for early stage investment and certainly an area where we will continue to see acquisitions and IPOs in the coming years. The average seed round of investment for startups continue to rise when compared to the previous year. The types of cyber-security solutions that has attracted investors in 2016 was platform solutions and not just niche or single-purpose products. The most funded fields of 2016 included mobile security, vulnerability & risk management, network security, SCADA security, and incident response.

Companies, irrespective of industry, are moving towards a reliance of working and transacting online. Companies are storing more data, more types of data and in the cloud and typically their main point of customer contact is via the internet. This model has created an exposure of increased potential risk to brand and revenue that accompanies security failures that has finally been elevated to being a board-level concern. The results have raised the level of spending on cyber-security solutions to unprecedented levels in both the private and public sectors. Investments in cyber insurance and vulnerability & risk management continues to rise with management tools to manage, mitigate and lower the risk of a breach. Understanding and addressing vulnerabilities that a company has to threats can help lower their premiums for cyber insurance, which is now an essential tool to offset the high cost of cyber attacks. This sector has been gaining interest from investors during 2017 and will continue to do so over the next few years.

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