“Business buyers have changed their tastes in what they look for as things evolve. Strategic buyers who are really driving consolidation, particularly in areas like cybersecurity, artificial intelligence and data analytics, are fueling this growth,” says John Holland, managing director at Corporate Finance Associates.
The rise of AI solutions and evolving cybersecurity threats are giving way to fertile ground for M&A activity for cybersecurity and data analytics companies, according to an M&A expert.
“Data analytics and cybersecurity will become a hot area for the foreseeable future” John Holland, Managing Director of Corporate Finance Associatestold CRN. “(Business) data analytics, I think we’re just at the beginning. Data analytics, artificial intelligence, machine learning… I would expect a lot of activity in the coming years.
In the cybersecurity space, the focus appears to be shifting toward strategic buyers looking to improve their cybersecurity offerings.
“Cybersecurity remains an incredibly dynamic sector,” he said. “It’s the strategic buyers who are really driving the consolidation.”
Corporate Finance Associates, based in Laguna Hills, California, is an investment banking firm with decades of experience executing mergers and acquisitions in the IT services and telecommunications industries.
Despite a decline in the number of transactions compared to previous quarters, Holland said the market remained strong with promising growth on the horizon, driven by changes in interest rates and increased demand in specific areas like cybersecurity and data analysis.
The current volume of M&A activity in North America remains “robust,” although down from peaks in 2021 and early 2022, he said. In fact, the number of transactions is even higher than before the pandemic. According to Holland, there were 336 IT services M&A deals in 2018 and 383 deals in 2019, an average of 96 deals per quarter. In the third quarter of 2024, there were only 110 transactions.
“We see fewer transactions than during the pandemic boombut the market is still very healthy,” he said. “And with key factors such as interest rates and emerging technologies in play, the M&A landscape is poised for continued growth. I am very optimistic for 2025 because I think interest rates will be reduced. This is fueling M&A activity, which will trigger more deals in sectors such as MSPs, data analytics and cybersecurity. Businesses are focused on gaining expertise in AI and machine learning, and cybersecurity will remain a top priority given the growing threats posed by AI-based attacks. »
AI is such a hot area right now that he said companies in industries such as oilfield services are acquiring data analytics companies to stay competitive.
“This is likely a trend that will continue, as companies across industries recognize the importance of AI in their operations,” he said.
And while interest rates continue to play a key role in shaping the M&A landscape, recent reductions in the U.S. and Canadian markets have sparked optimism about future growth that Holland believes will make 2025 an important year for mergers and acquisitions.
“Business buyers have changed their tastes in what they look for as things evolve,” he said. “Strategic buyers who are really driving consolidation, particularly in areas like cybersecurity, artificial intelligence and data analytics, are fueling this growth.”
