Paul Hager: M&A opportunities in cybersecurity, clean energy and environmental sectors
An interview with Paul Hager, Partner in the United States.
From communications technology development and international policy negotiations to ONEtoONE
My professional background is diverse, with an early career role in communications technology development and international policy negotiations (as a U.S. Representative to Europe). In this work, a high premium was placed on anticipating the technological, economic, and political pressures that might pose the next set of challenges and opportunities. Since leaving that work in 1995, my focus has been to help companies achieve strategic growth – primarily through building better business models, investment strategies, leadership teams, operations, and financial structures. In these years, I founded technology companies and led the strategic management consulting practice for a Fortune 500 company – Science Applications International. A common factor in my work has been the focus on the strengths (value) and weaknesses (risk) of companies relative to changing business environments.
My joining ONEtoONE was an opportunity for me to continue my passion in helping companies reach greater business success, more quickly, through strategic acquisitions or divestitures. I have found my ONEtoONE team members to be incredibly knowledgeable in their respective industry markets and dedicated to achieving results that optimize value to each client. I think the quality that sets ONEtoONE apart is its team-focus approach to identifying and capturing that value for clients. My colleagues know that a team that contains talent tailored to meet each client’s M&A goals will deliver the greatest value. Working with M&A experts from around the world is exhilarating.
The future of cybersecurity, clean energy, and environmental M&A
Over the past twenty years, my work as financial advisor has included asset valuation, investment strategies, due diligence, and terms negotiation. I have led valuation and diligence projects for corporate clients in Europe and North America and the core of my investment strategy work, has been to ensure prospective buy or sell decisions are aligned with the company’s corporate “purpose” and business model. I believe ignoring this alignment is the first step toward an unsuccessful M&A effort. Fundamental to my advisory role is to clearly identify the true value of any company – whether that company is to be sold or purchased. I specialize in clean energy, environmental, Internet, and cyber security technology industries.
For 2018, I expect M&A opportunities and activity to accelerate in these sectors, but for different reasons. In cybersecurity, this 2018 will see the continued consolidation and expansion of competition, as was the case in 2017. Thales’ December 2017 purchase of Gemalto for $5.43Billion exemplified the traditional process of a large technology firm augmenting its security services portfolio. But, Symantec’s sale of its website and key management security services for $950Million while, at the same time, it purchased mobile (Skycure) and enterprise (Fireglass) capabilities underscores its services re-orientation to better meet growing global demand for dynamic, scalable mobile security technology. So, cybersecurity M&A seems to be fueled by companies’ need to better align their services and technology offerings to quickly-changing technology and application platforms. The cybersecurity market spend is estimated to be $1Trillion between 2017 and 2021. So, in 2018 I anticipate cybersecurity’s current $232Billion level of M&A and funding activity to expand at least at the market’s 15% growth rate.
M&A growth within the clean energy and environmental services markets appears to be a result of accelerating technology advances and rapidly-expanding market demand. Volume in renewable energy M&A volume has increased yearly since 2010. In 2017, 406 deals represented $360Billion in value, up from $293Billion in 2016. Excluding the purchase of large-scale infrastructure/yieldco assets, the M&A volume drops to $45Billion. Accelerating technological advances in energy production, storage, delivery infrastructure, and use now are forcing companies to buy innovation – in terms of full-service energy generation and fulfillment. I expect the volume of deals to increase, even though the average deal size may remain static.
The crossborder volume for clean energy M&A is approximately 46%, with nearly half of that taking place in the United States and Europe. Crossborder volume for cybersecurity M&A is approximately 32%.
Current tech and cyber security mandates
I am currently working with a software company that provides advanced technology solutions for high-integrity software design, development, and testing for commercial and government clients – specifically in the areas of defense and law enforcement. Located in California and New Mexico, the company wants to acquire a firm that holds a differentiated space within the software engineering capability to government defense clients.
In addition, I am working with two cyber security companies, one in Canada and the other in the US. They specialize in cloud and blockchain security technology for the commercial market. Both will be a sell-side mandate.
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