Mergers and Acquisitions break records, propelled by increased demand for cybersecurity due to escalating ransomware attacks and nation-state threats
In a rapidly evolving cybersecurity landscape, tech giants are bolstering their defences by acquiring innovative companies to expand their threat detection and response capabilities.
IBM has recently agreed to buy ReaQta, a move that will enhance its extended detection and response (XDR) capabilities through its QRadar XDR suite. Meanwhile, Alphabet, Google's parent company, has been on a major acquisition binge, with the acquisition of Siemplify, a provider of security orchestration, automation, and response (SOAR) technology, being one of the latest additions.
Google's acquisition of Mandiant is expected to help the company serve customers deeper, while Microsoft has been making strategic acquisitions to provide a more comprehensive view of threats targeting their business and a better understanding of vulnerable internet-facing assets. In fact, Microsoft's security-related revenue was up 45% to $15 billion in the fiscal second-quarter, as per CEO Satya Nadella.
The cybersecurity industry has experienced an unprecedented surge in ransomware, software vulnerabilities, and malign cyber activity against the private sector and critical infrastructure. This surge has not gone unnoticed, with Congress and federal regulators placing additional scrutiny on the IT sector amid concerns about the growing power of the industry's biggest technology firms.
The acquisition frenzy is not limited to the tech giants. Some of the nation's top IT and cloud services providers have invested heavily in acquiring smaller rivals and developing new capabilities for their internal security services. Companies like Citrix, Domino's Pizza, Heineken, and others are using Microsoft to protect their multicloud infrastructure.
The cybersecurity market shows deep investor demand, with $5.4 billion raised across 249 transactions in the sector. In the first quarter alone, the industry recorded 108 mergers and acquisitions with a combined transaction volume of $29 billion, according to Progress Partners. Gartner data shows venture capital investments in cloud security have accelerated, reaching $6.2 billion in 2021, compared with $2.6 billion in 2020.
Cloud-native application protection platforms have emerged as a leading area of growth in terms of venture capital spending. Leading vendors compete to acquire the most outstanding technology assets in categories like secure software-defined wide area networking, XDR log ingestion, and privileged access control of employee workstations.
One such acquisition is the deal between SentinelOne and Attivo Networks, which will combine Attivo Networks' identity protection and response technology with SentinelOne's autonomous XDR platform.
The acquisition process is expected to continue, with M&A activity in the cybersecurity sector expected to hit a record pace for the second consecutive year, after reaching $70.4 billion in 2021, according to a market report from Progress Partners. Companies like Nukkleus Inc. and The Chapters Group are making strategic acquisitions to integrate continuous system monitoring and expand high-margin cybersecurity services across their portfolios, aiming for significant organic growth.
As the cybersecurity landscape continues to evolve, it is clear that tech giants and other service providers are investing heavily to stay ahead of the curve and protect their customers from the growing threats in the digital world. With 97 distinct cloud security firms in the U.S., Israel, and China leading the space, it seems that the competition will only intensify in the coming years.
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