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Cybersecurity offers challenge and opportunity for M&A

Increasingly connected world requires gold standard implementation

Caution is said to be the parent of security – good advice for a global M&A landscape facing new and daunting threats from foes familiar and unknown, which are operating invisibly and striking within the blink of an eye.

But there is also opportunity: the cybersecurity market is widely expected to reach at least $500 billion by the end of the decade, driven by a rise in cloud solutions, the increased reach of the internet of things, and continued growth in smart devices.

Across the M&A landscape, the impact is likely to be two-fold: an ongoing activity buzz in investments across the cybersecurity sector, despite whatever downturn may come elsewhere, and a higher profile for all aspects of digital and IT security within and around the deals themselves.

In the spotlight

Marcel Vlaar, Financial Due Diligence Director at RSM Netherlands, explained that experts in advisory firms know the importance of the global cybersecurity market better than most, given the amount of information they hold and the significant investments made in their own systems. This familiarity provides them with a sector overview, a particularly important trend to track given the speed at which cybersecurity is growing.

"It is a market that is developing rapidly," said Vlaar, "and players in countries, including the Netherlands, have seen significant growth over the last couple of years due to increased volumes. I'm certain cybersecurity will remain important as long as people share information."

Protect and serve

The ripples of cybersecurity extend outwards, according to Eric Fougedoire, Partner at RSM France: "This goes well beyond securing data to maintain confidentiality through the dealmaking process; it is also about data protection in terms of GDPR and related developments that are gaining momentum worldwide."

Fougedoire also pointed out that working to stay ahead of the cybersecurity curve provides its own knock-on benefits.

"In a market sense, best practice internally creates opportunities, because we are all experiencing a revolution. Everybody needs to have the right tools in place to provide cybersecurity, we all need to know how best to meet those needs."

He added: "Trust will fuel confidence and interest in those companies which have proven experience doing this type of work, along with the engineers and experts who have what is a very specific skillset."

Which is why people – in addition to performance and platform – are seen as an increasingly important driver for M&A activity in this area. "Acquisition in the cybersecurity space can be profitable, of course, but it can also often be about securing a workforce and its proven expertise,' said Fougedoire.

New normal

The United States is often seen as leading the charge on cybersecurity but – given the crossover of activity between the US and UK, between the UK and Europe, and between Europe and the US – the bar for effective cybersecurity systems is becoming increasingly high for the entire M&A sector.

Increasing awareness of the risks involved in an ever-more-connected world, the cross-border factors that feature in more and more deals, and the heightened scrutiny that often accompanies a tighter economic landscape – all will contribute to the ongoing importance and expanding role of the sector.

"Cybersecurity is an area of both growth and opportunity," said Lee Castledine, Partner at RSM UK and member of the RSM Global Financial Due Diligence Leadership Team. "As we enter an era of increased uncertainty, I certainly can't see that changing."




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