2021 is all about cybersecurity (but many dealmakers don’t expect a rise in valuations)
Bitcoin may be all the hype this year, having soared far beyond its 2017 high and minted new millionaires with a $40,000 price tag.
But bankers and dealmaking executives anticipated that the biggest acquisitions will be based around cybersecurity rather than cryptocurrency or the big buzzword of last year, A.I.
About 85% of the 89 surveyed by 451 Research, a division of S&P Global Market Intelligence, say they believe “information security” has become more important to the “acquirers’ strategic goals over the past 12 months”—beating out A.I., which had become more important the year prior.
It might run only in the background on a good day, but cybersecurity has been propelled to the forefront in 2021 as many businesses have been forced online. Last year provided one of the most chilling warnings of digital espionage when a swath of U.S. federal agencies and private companies were breached. At the center of it all was the little-known software company SolarWinds. Even now, investigators are still trying to assess the full extent of the damage, widely thought to have Russia’s fingerprints smudged over it.
Dealmakers, though, are the most bullish they have been in seven years around the M&A landscape. Around 75% of the survey respondents say they expect an increase in acquisitions.
But investors and bankers largely don’t anticipate an increase in valuations, with 35% saying they expect that number to rise. The rationale is likely twofold here: Many expect tech valuations to come back to earth. Secondly, while markets paint tech with a widely optimistic brush, some companies—including those exposed to travel—have struggled in the pandemic and, though they may become prime acquisition targets, will likely have to sell at a lower price.
THE IPO LOVE CONTINUES: While the S&P 500 swooned yesterday, investors continued to pile into IPOs. Poshmark, an online marketplace for second-hand clothing, jumped 141%. And private equity-backed pet goods company Petco rose 63% in its return to the public markets.
