Private Equity
Hackers, remote workers spur record PE investment in cybersecurity
August 23, 2021
Private equity buyouts in cybersecurity are hitting new records as a fast-growing industry responds to a surge in remote working and increasingly sophisticated cyberattacks.
PitchBook's Q2 2021 US PE Breakdown revealed cybersecurity deals have swelled in terms of deal value over the past six quarters, and have spiked in 2021 thanks to a handful of blockbuster pacts. Announced in April, Thoma Bravo's $12.3 billion acquisition of Proofpoint set a record for the largest cybersecurity buyout ever, and was larger than all cybersecurity buyouts in the third and fourth quarters of 2020 combined.
Factoring in the Proofpoint buyout and the $900 million acquisition of ExtraHop by Bain Capital and Crosspoint Capital Partners in June—both of which have been agreed to but not yet completed—cybersecurity buyouts have already reached $23 billion combined in 2021. More deals are expected.
"I think the main reason for increased interest in cyber is because people are now really seeing a need for it," said Jinny Choi, a private equity analyst at PitchBook. "With significant cyberattacks in the last year, and remote work driving more enterprises and its employees online, the demand for online security is being heightened, with a focus on more specific and sophisticated technology," Choi said.
Thoma Bravo has been particularly active in the space, completing a deal to take cybersecurity company Sophos private last year, and finalizing its takeovers of Imperva and Veracode in 2019. Advent International has also been active, purchasing cyber company Forescout in 2020.
Choi adds that the COVID-19 pandemic has likely pulled technology trends for private equity investors forward by five to 10 years. Market research firm Technavio predicts that the cybersecurity market will grow at an annual rate of around 15% between 2021 and 2025.
"It's impossible to say with confidence next year will be higher, but five years from now it certainly will be, as the industry matures and restructures to build subsectors, and as PE firms take notice of the attractive opportunities being created," Choi said.
Featured image via Olemedia/Getty Images
PitchBook's Q2 2021 US PE Breakdown revealed cybersecurity deals have swelled in terms of deal value over the past six quarters, and have spiked in 2021 thanks to a handful of blockbuster pacts. Announced in April, Thoma Bravo's $12.3 billion acquisition of Proofpoint set a record for the largest cybersecurity buyout ever, and was larger than all cybersecurity buyouts in the third and fourth quarters of 2020 combined.
Factoring in the Proofpoint buyout and the $900 million acquisition of ExtraHop by Bain Capital and Crosspoint Capital Partners in June—both of which have been agreed to but not yet completed—cybersecurity buyouts have already reached $23 billion combined in 2021. More deals are expected.
"I think the main reason for increased interest in cyber is because people are now really seeing a need for it," said Jinny Choi, a private equity analyst at PitchBook. "With significant cyberattacks in the last year, and remote work driving more enterprises and its employees online, the demand for online security is being heightened, with a focus on more specific and sophisticated technology," Choi said.
Thoma Bravo has been particularly active in the space, completing a deal to take cybersecurity company Sophos private last year, and finalizing its takeovers of Imperva and Veracode in 2019. Advent International has also been active, purchasing cyber company Forescout in 2020.
Choi adds that the COVID-19 pandemic has likely pulled technology trends for private equity investors forward by five to 10 years. Market research firm Technavio predicts that the cybersecurity market will grow at an annual rate of around 15% between 2021 and 2025.
"It's impossible to say with confidence next year will be higher, but five years from now it certainly will be, as the industry matures and restructures to build subsectors, and as PE firms take notice of the attractive opportunities being created," Choi said.
Featured image via Olemedia/Getty Images
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