附近上门

While not on the same breakneck pace of last year, M&A dealmaking involving cybersecurity startups has remained robust in 2022, even with a sputtering economy.

Last year was a record breaker for cybersecurity dealmaking, with 124 VC-backed startups getting bought, according to 附近上门 data. Although it doesn鈥檛 seem that 2022 will break that record鈥攚ith only 49 announced through nearly half the year鈥攖his year is still clocking in at a healthy pace, according to those who observe the market.

Dealmaking may not set records this year, but it hasn鈥檛 fallen off a cliff, either: For comparison, all of 2020 saw 76 cybersecurity startup M&A deals.聽

鈥淲hile we’re a bit behind the record 2021 levels, when you compare this year’s activity with 鈥� all of 2020, it paints a slightly more positive outlook,鈥� said , founding director of San Francisco-based financial advisory firm .

鈥淭hat being said, the public market and associated cryptocurrency corrections, coupled with the overall economic and geopolitical uncertainty has led to a slight slowdown in M&A to start the year,鈥� he added.

Slight slowdown

Despite that slowdown, this year already has seen some big deals involving VC-backed startups, including:

• bought Burlington, Massachusetts-based application security company for $2.5 billion in May.
• acquired Milpitas, California-based distributed services platform for $1.9 billion in April.
• bought Fremont, California-based identity detection and response firm for $616.5 million in March.

That should not come as a shock to most. Cybersecurity has proven resilient in a market where threats and attack surfaces are ever expanding. Although some IT budgets are getting cut, most companies still see cybersecurity as a 鈥渕ust have” due to the growing number of domestic and international attacks and bad actors.

, co-founder and managing director at 鈥攚hich specializes in cybersecurity and infrastructure software investments and has seen four exits this year alone in security鈥攕aid the M&A dealmaking market is still robust and still providing good multiples for investors.

鈥淢&A premiums are not coming down yet because the companies getting bought right now are some of the best,鈥� said Y茅pez, whose exits include Attivo Networks and, more recently, threat detection and response startup getting bought by .

Y茅pez said he is still seeing strong multiples鈥攁round 20x ARR for good startups鈥攁nd thinks it should continue with strategic buyers such as , and still swimming in the acquisitions waters.

Google already pulled off a huge deal in cyber when it announced it would pay $5.4 billion to buy publicly traded cyber firm .

鈥淚 think where you will see prices fall is when private equity starts to enter the frame,鈥� he said.

Needing cash

Prices also could start to fall if fundraising continues to slow and startups are in need of cash.

鈥淭he real question, however, is after valuations in the private markets recalibrate. Will that create a tailwind for M&A for those companies that may be encountering challenges raising capital or possibly facing a ‘down round’ if they were to raise capital?鈥� said.

Boukouris said while evaluating strategic alternatives, startups may start eyeing M&A as an alternative if raising money is difficult.

Still, the slowdown in fundraising has not seemed to affect cyber as much as other tech sectors, with the industry minting .

While some fear the economic uncertainty due to inflation and higher interest rates鈥攚hich causes the money to complete deals to be more expensive鈥攃ould chill some M&A in the second half of the year, many who invest in cyber do not anticipate a slowdown.

鈥淚 don鈥檛 think interest rates should affect M&A too much,鈥� Y茅pez said. 鈥淚 think it鈥檒l still be strong in the second half.鈥�

Methodology

Cybersecurity is defined by the industries of network security, cloud security, cybersecurity and identity management, as according to 附近上门 data.

Further reading:

• Cybersecurity Funding Remains High Even As Venture Cools Off
• Google Sets The Pace In What Could Be A Record Year For Cyber M&A
• Record Number Of VC-Backed Cyber Companies Acquired in 2021, Even As Venture Funding Hits New Highs

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