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A wave of trading activities hit the cybersecurity industry.
CrowdStrike is preparing for an imminent initial public offering that could value the company at $ 6 billion. Elastic, maker of a Splunk data capture system, has just won Endgame, a competitor of CrowdStrike, for a relatively small amount of $ 234 million. Investment firm Insight Partners bought a holding company, Recorded Future, a $ 780 million information company. And Cisco, Palo Alto Networks, FireEye and Imperva have all made cybersecurity-related acquisitions in the last two weeks.
What is behind all this consolidation of the market? One possibility: fears of a future recession.
Ron Gula, a cybersecurity investor and former student of the US National Security Agency, said Fortune this rumor of a possible slowdown can be a cause of planning for drought. Venture capital firms use these circumstances to persuade new businesses to accept new fundraisers or to put pressure on their investments to make withdrawals. Contractors who observe a potential cliff on the horizon while watching their rivals absorbed by the buyers can find the time for a mature exit. Peer pressure is increasing: as outlets occur, "it can create a sense of urgency" among the founders, Gula added.
About five years ago, the venture capital market for cybersecurity sparked a boom, and the companies funded at that time are now mature enough to go out. At the same time, there are more potential buyers in all sectors. Enrique Salem, cybersecurity investor at Bain Capital Ventures and former CEO of Symantec, expects a continuation of merger mergers and acquisitions, particularly as companies that are not considered cybersecurity firms are seeking to strengthen their offers. "Companies adding security capabilities to their portfolios," he said. "They see the benefit of saying: we have a lot of data, we will be looking to strengthen the security of this data."
In the event of a storm, some cybersecurity companies may be better placed than others to withstand the winds. Sarah Guo, an investor at Greylock Partners, agrees that "there is some concern about how weaker or less strategic companies will progress when an inevitable bull market changes."
"It's hard to get high quality badets," says Guo. "One of the key factors could be the current strength of the technology market, which is to give buyers multiple (and therefore ammunition) to make large acquisitions." I understood.
What do cyber security officials think? Tom Turner, CEO of BitSight, told me at a dinner that he organized this week that he was not too concerned about the beginning of the week. winter. As the cybersecurity sector contracts periodically, "consolidation is rarely as extensive as expected," he said. In addition, when competitors withdraw, this creates opportunities to hire talent who then re-enter the market.
Nobody knows exactly when a downturn could occur, but smart money is taking steps in preparation. As the clouds gather, we must turn to those who are sunny enough to penetrate the darkness.
***
By the way, I would like to launch a call for applications for The wealth Change The World List, which recognizes companies that do well by doing good. This is not a list that honors companies for philanthropy. Rather, it aims to highlight societies that have incorporated social good into fundamental aspects of their business, using the power of profit to solve global problems. (Think of Merck investing in Ebola vaccines.) Send me a note if you have any recommendations.
Robert Hackett
@rhhackett
Welcome to the Saturday edition of the technical sheet, Fortune & # 39;Daily newsletter. Fortune Robert Hackett reporter here. You can join Robert Hackett via Twitter, Cryptocat, Jabber (see OTR fingerprint on my about.me), encrypted email with PGP (see the public key on my Keybase.io), Wickr, Signal, or whatever you prefer (safely). Comments welcome.
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