Last month, Broadcom's public $15bn failure to take over security software vendor Symantec sent shockwaves through the investor community.
Symantec's shares took a 15 per cent tumble, while analysts questioned what Symantec's board could do to reassure jittery shareholders.
However, the inability of both sides to agree on the cybersecurity vendor's valuation is indicative of what many in this market are increasingly commenting on: just how expensive buying a security outfit has become.
One security vendor's global sales boss quipped to CPI that there is almost more private equity money in security than revenues generated by security firms.
CPI has spoken to five cybersecurity stalwarts to ask:
Do they think the cybersecurity market is now too expensive to acquire or IPO in?
Nuvias EVP Cybersecurity - Ian Kilpatrick
"There's too much money coming in. My view on the dynamic is that everyone is chasing a unicorn," he said.
"If you chuck a couple of hundred million at 20 to 30 small sized businesses, and you get one unicorn, then you've made out like a dream…
"It was exactly the same in the.com boom, where everybody invested and they were using metrics that weren't commercial metrics, they were structural market share metrics, number of hits, number of new users to your site, all of those things. Yet when you looked at the market winners, they may not have had the same metrics."
However, Kilpatrick believes that the market hasn't yet reached the zenith of security valuations.
"I'm not sure it's too expensive yet, there is some pushback.
"There are still people continuing to be buyers so I don't think we've seen the end of this boom."
He added that from a channel perspective, the PE mentality of casting a wide venture capital net is having a detrimental effect on partners' ability to hire and retain skilled security staff.
"There's a huge overhang that completely disrupts the channel.
"If there are 20 players coming in of which they [PE] need three to win, that means 17 are going to fail. Yet those 17 all have funding, which completely distorts the market because it takes up skills.
"They have a short time frame to use that money, so, they will just buy resource in order to build the scale. And that resource has to come from the channel. Typically the channel players are developing self-training and then watching a number of their staff being taken by what will be failed vendors. That forces up prices for everybody, exponentially."
SonicWall CEO - Bill Conner
"I think security is hot. There's a lot of money at play. And look at the data: the threat landscape is getting very, very real," Conner said.
"So there's a lot of sponsors in terms of private equity (PE) rolling up our own company, and other PE companies are buying security because it's increasingly becoming a mainstay in terms of importance.
"Likewise, some like Broadcom and others are saying ‘Oh my gosh, we've got to build this in either our apps, our hardware, or our business'.
"The thing is, the people, intellectual property and capabilities in security are in short supply. So people are looking to control that destiny because you can't hire it out. So to scale it, in a lot of cases, you need to buy it."
On the reports that McAfee is also planning to return to the public market, following the high-profile IPOs of other cybersecurity vendors such as CrowdStrike, he said:
"McAfee is the latest example of change in the market: they were private, they went public, they got bought up strategically, they went private, and now they're going to IPO.
"So, IPOs now are the whole way to monetise yourself if you've got a stable business.
"The question is whether it will consummate as a true IPO, or whether they'll get bought at the last minute by private equity. That's a financial play that's playing out, because to maximise the value they get, a lot of PEs don't want to buy right now because security is becoming a premium in the market….We can see it's definitely become a premium."
Forcepoint EMEA boss - Ben Richardson, and UK&I boss - Matt Bruun
Both channel bosses at the cybersecurity vendor question whether all the money that has flooded their market has been worth it for partners or customers.
"I think a trillion dollars has been spent on cybersecurity over the last seven years. Yet 95 per cent of attacks are successful. So effectively, the security industry is not doing a great job," Richardson said.
Richardson used to be a sales lead at Symantec, himself. His view of his former firm is that that if it were to be snapped up, it would cause "disruption" in the market due to Broadcom's reputation as something of an asset-stripper.
"It would create opportunities at lots of levels for us", he said.
"But it's very easy to get distracted…There is just so much money involved these days."
Forcepoint's UK&I channel boss Matt Bruun added:
"It's an interesting time to be a Symantec partner…
"I think it's probably well understood in the market what Broadcom do when they acquire, so that is inevitably going to result in disruption for their customers, for their employees, and for their partners," he said.
"We're keeping a very close eye on what's going on."
Datto CEO - Tim Weller
"I think it's fair to say though, that security is very, very hot. And that can make things uniquely difficult, because you know, four people in a garage coding software that used to work in another security company are suddenly an acquisition target," he said.
Like Kilpatrick, Weller also expressed concern that the rapidly accelerating investment in cybersecurity is "reminiscent of the internet bubble".
This time round, he thinks the pressure is driven by the perception that companies have to be able to tell customers they have a security proposition.
"It's a real pain point, there. I think every major tech company is feeling a lot of pressure to have some kind of a story in security.
"And if you can buy something, so be it…
"Our number one job has got to be making data secure. And we spend an enormous amount of money just raising our moat drawbridge …And this is the race to buy security companies is because we're all under attack. This is not something that's a one or two year trend that is going to go away."
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