What are the emerging sectors in M&A, and what does the emergence of these sectors mean for M&A? Paul Hager, one of our partners in the United States., analyses the situation in this interview.
From communications technology development and international policy negotiations to ONEtoONE
What is your professional background?
My professional background is diverse. I began my career in communications technology development. Then, I worked in 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.
How can companies achieve strategic growth?
There are different ways to achieve this: through building better business models, using investment strategies, leadership teams, operations, and financial structures.
From 1995 onwards, 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. That is, establishing the value and risk of companies relative to changing business environments.
How did you join ONEtoONE Corporate Finance?
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. They are also dedicated to achieving results that optimize value for 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.
That, plus the excitement and opportunities that come with working with M&A experts from around the world.
Emerging sectors of M&A: the future of cybersecurity, clean energy, and environmental M&A
Over the past twenty years, my work as a 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.
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.
What do you think are the emerging sectors in the M&A world?
As an expert in the clean energy, environmental, Internet, and cyber security technology industries, I expect that these sectors will generate major M&A opportunities in the coming years.
Why are these the sectors with the strongest M&A activity?
In the cybersecurity sector, there has been continued consolidation and expansion of competition since 2017.
For example, Thales’ December 2017 purchase of Gemalto for $ 5.43 billion exemplified the traditional process of a large technology firm augmenting its security services portfolio.
Symantec’s sale of its website and key management security services for $ 950 million. At the same time, it purchased mobile (Skycure) and enterprise (Fireglass) capabilities.
In its strategy, it emphasised its refocusing on services. This enables them to address better the growing global demand for dynamic, scalable mobile security technology.
What motivates this interest in cybersecurity companies?
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.
Between 2017 and 2021, the cybersecurity market spending was estimated at $1Trillion. As of 2018, cybersecurity’s $ 232 billion level of M&A and funding activity expanded at least at the market’s 15% growth rate.
What about clean energy and the environmental M&A sectors?
M&A growth within the clean energy and environmental services markets appears to be a result of accelerating technological advances and rapidly expanding market demand.
Volume in renewable energy M&A volume has increased yearly since 2010. In 2017, 406 deals represented $ 360 billion in value, up from $ 293 billion in 2016.
Excluding the purchase of large-scale infrastructure/yieldco assets, the M&A volume drops to $ 45 billion.
What was the reason for this boom?
Accelerating technological advances in energy production, storage, delivery infrastructure, and use are now forcing companies to buy innovation. This innovation manifests itself in terms of integrated energy generation and completion.
What deal volume is expected in these emerging sectors in M&A?
I expect the volume of deals to increase, even though the average deal size may remain static.
The cross-border volume for clean energy M&A is approximately 46%, with nearly half of that taking place in the United States and Europe.
Cross-border 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. The company wants to acquire a firm that holds a differentiated space within the software engineering capability. Located in California and New Mexico, they offer support 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.
Will Paul Hager‘s expectations for these emerging sectors in M&A be fulfilled? What seems clear is that we are moving towards an increasingly focused environment on technological development.
Also, a greater awareness of the need for sustainability and care for the environment.
Whatever your company’s sector, our expert advisors will make the most of any corporate transaction you need to undertake.
If you want to find out more about the expertise of our partners, have a look at the “ONEtoONE Team” section
