The economics of some markets dictate that they be fragmented. However, in cybersecurity, we do not believe that this is the case. The current fragmented state of the market presents a great consolidation opportunity for investors. However, there are very industry-specific pitfalls and challenges that potential consolidators must consider upfront to make cyber deals a success.

The threat of cyberattacks is on the rise. There are more attacks by the month, and the financial damage they cause is increasing constantly, both because attackers are optimizing their attacks and due to increasing regulatory fines. As a result, becoming “cyber-ready” has become a key priority for board members and management of firms across all sizes and industry backgrounds.

However, most firms find it difficult to build complete cyber operations in-house. Consequently, they are turning to external specialist providers to help them prepare for and respond to attacks. Unfortunately, though, selecting the right supplier can be a true challenge, given the fragmented state of cybersecurity software and service providers.

In this paper, we present our hypothesis that the market of cybersecurity providers is about to consolidate and that there are great potential benefits for successful consolidators.

However, in our experience, consolidation will be no easy feat, as there are very specific challenges in consolidating cybersecurity firms – most notably in the areas of deal sourcing (how to find the rare pearl amongst many small and emerging companies), pre-signing due diligence (in particular technical and commercial) as well as post-signing integration (key person risk, technical integration risks).

Read our report to explore the opportunity at hand and to understand the key challenges that successful consolidators will need to overcome.

Please contact Florian Bornhauser or Alfonso Marone with any questions.

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