Cybersecurity acquisition spree exhibits intense appetite for reliability
In a significant move to bolster its position in the cloud market and enhance its cybersecurity capabilities, Google's parent company, Alphabet, has announced the acquisition of Mandiant, one of America's leading threat intelligence and incident response firms, for $5.4 billion.
Mandiant, renowned for its role in high-profile threats such as the SolarWinds hack in 2020 and the Colonial Pipeline ransomware attack last year, brings a wealth of operational knowledge and understanding of key threat signals to the table. This acquisition presents a big opportunity, capitalising on Mandiant's expertise and Google's data and cloud experience.
The cybersecurity sector has seen a surge in M&A activity in recent years. Last year alone, there were over 200 deals, with aggregate disclosed deal valuations exceeding $55 billion. The priciest cybersecurity M&A deal in the past five years was a private equity group's $14 billion purchase of McAfee.
The acquisition removes concerns about Mandiant's ability to compete against larger competitors, as Google's prowess in analytics, data, and AI can be leveraged for Mandiant's automation of insights. The number of cybersecurity companies has quadrupled in the past five years, now exceeding 4,000.
Google currently holds a 10% share of the cloud infrastructure services market, with Microsoft Azure and Amazon Web Services commanding 21% and 33% respectively. The trio of Google, Microsoft, and Amazon together control a significant portion of the $178 billion cloud infrastructure services market.
However, the acquisition also brings potential risks. Brain drain is one of the primary risks in any acquisition, as key personnel may flee or be poached. Mandiant, due to high demand, has to turn clients away, which could be a concern post-acquisition.
Companies manage an average of 76 separate security tools, an increase from 64 tools in 2019, according to a survey of 1,200 senior security leaders. This complexity could pose challenges in integrating Mandiant's services into Google's existing offerings.
Analysts have questioned the amount of money Mandiant would have to invest in R&D to compete against larger competitors. With Google's resources at its disposal, these concerns are likely to be alleviated.
The acquisition is a strategic play to strengthen Google's position in the cloud market, as well as to provide Google with a formidable cybersecurity offering to attract more clients. The acquisition is expected to close in the second half of 2022, subject to regulatory approvals.
