The recent cyberattacks on meat producer JBS USA and gas pipeline distributor Colonial Pipeline show the need for cybersecurity protection has never been more dire. As hackers become more sophisticated, cybersecurity companies will remain in demand as desirable acquisition targets.
The attacks on JBS and the Colonial Pipeline “highlight the human element as the largest weakness of corporate IT infrastructure,” said Michael Lyon, managing director at technology-focused investment bank Vista Point Advisors, in an interview with Mergers & Acquisitions. “We expect an acceleration of M&A and investment activity in all areas of cybersecurity but particularly in cybersecurity awareness and threat intelligence.”
When the world was hit by the pandemic in 2020 and employees moved to working from home, businesses had to scramble to set up remote IT networks. This created ample opportunities for hackers and cybercrime, and fraud became more fast-paced and sophisticated.
One area that is expected to see a lot of deals is application security. In June, Apax Partners-backed Coalfire acquired application security provider Denim Group. “In the application security space specifically, many organizations are challenged with responding to the volume of vulnerabilities that are surfacing,” Coalfire chief marketing and strategy officer Patrick Kehoe told Mergers & Acquisitions. “We expect to see increasing M&A activity that will enable best of breed services coupled with products to reduce the burden on internal cyber resources.”
It is not just businesses that need to stop cyberattacks. Consumers needs to protect their identities too. In June, identity verification company Mitek (Nasdaq: MITK) acquired ID R&D, which offers artificial intelligence-based voice and face detection.
“Today’s consumers are transacting in a digital-first world, and they expect to trust technology to keep them safe against burgeoning threats,” said Mitek CEO Max Carnecchia when the deal was announced. “Identity verification has never been more relevant. Rapid advances in artificial intelligence are enabling novel forms of fraud, which means technologies like those pioneered by ID R&D are critical in this fight.”
The identity verification market is expected to reach $15.8 billion in the U.S. by 2025, according to a report by Markets and Markets, and Juniper Research estimates that by 2025, 1.4 billion consumers will be using facial recognition to facilitate secure transactions. There is clearly a growing market for facial recognition technology.