As private equity firms pour unprecedented capital into the security sector, with global investment soaring to $25.6 billion in 2023, it's clear that safeguarding our digital and physical world has become one of the most compelling and lucrative investment opportunities of our time.
Key Takeaways
- Global private equity investment in cybersecurity firms reached $12.4 billion in 2023, marking a 15% YoY increase.
- The security industry attracted $8.2 billion in PE buyouts in 2022 across North America.
- European PE deals in physical security companies totaled €3.5 billion in H1 2023.
- Global PE fundraising for security-focused funds totaled $22 billion in 2023.
- Thoma Bravo raised $24.3 billion for its latest cybersecurity fund in 2023.
- Vista Equity Partners secured $16 billion for security tech fund in 2022-2023.
- Global PE deal value in security industry hit $25.6 billion in 2023.
- North America accounted for 62% of cybersecurity PE deals by value in 2023.
- Thoma Bravo acquired Darktrace for $5.3 billion in 2023.
- Cybersecurity PE IRR averaged 22.4% for 2018-2023 vintages.
- Security services PE portfolios delivered 18.7% DPI in 2023.
- Thoma Bravo's cybersecurity funds achieved 2.8x MOIC since inception.
- Thoma Bravo topped security PE with 45 exits since 2015.
- Vista Equity Partners holds 28 cybersecurity companies in portfolio as of 2024.
- Hellman & Friedman completed 12 security deals worth $4.5B since 2020.
Private equity is investing record amounts into the global security industry.
Deal Activity
- Global PE deal value in security industry hit $25.6 billion in 2023.
- North America accounted for 62% of cybersecurity PE deals by value in 2023.
- Thoma Bravo acquired Darktrace for $5.3 billion in 2023.
- Vista Equity bought KnowBe4 for $4.6 billion in cybersecurity in 2022-2023.
- 345 PE-backed security deals closed globally in 2023.
- Average cybersecurity PE deal size was $185 million in 2023.
- Europe saw 112 security PE deals valued at €7.2 billion in 2023.
- Add-on acquisitions in security PE numbered 210 in 2023, 45% of total.
- Asia-Pacific security deals surged 28% to $3.9 billion in 2023.
- Hellman & Friedman invested $1.2 billion in security firms via 5 deals in 2023.
- U.S. physical security buyouts totaled $6.8 billion across 78 deals.
- Mega-deals over $1B in cybersecurity PE: 12 in 2023.
- Cross-border security PE deals up 19% to 67 transactions in 2023.
- Secondary buyouts in security represented 32% of deal volume in 2023.
- Latin America security PE deals: 18 valued at $620 million in 2023.
- Middle East security investments via PE: $1.1 billion in 12 deals.
Deal Activity Interpretation
Amidst a fortress of digital and physical threats, the private equity world's checkbooks have become our most formidable sentinels, deploying a record $25.6 billion in 2023 to fortify everything from Darktrace's algorithms to your local security guard.
Fundraising
- Global PE fundraising for security-focused funds totaled $22 billion in 2023.
- Thoma Bravo raised $24.3 billion for its latest cybersecurity fund in 2023.
- Vista Equity Partners secured $16 billion for security tech fund in 2022-2023.
- Hellman & Friedman raised $14.7 billion including cybersecurity allocations in 2023.
- Accel-KKR closed $17.5 billion mega-fund targeting security software in 2023.
- GTCR gathered $5.2 billion for its security services fund in H2 2023.
- European security PE fundraises hit €12 billion in 2023.
- U.S. cybersecurity-dedicated funds raised $35 billion across 45 vehicles in 2023.
- Asia security tech funds closed with $4.8 billion commitments in 2023.
- Carlyle Group allocated $8 billion from new fund to security investments in 2023.
- Average security PE fund size grew to $2.1 billion in 2023 vintage.
- 112 new security-focused PE funds launched globally in 2023.
- Oversubscription rate for top cybersecurity funds averaged 1.5x in 2023.
- LP commitments to security PE rose 12% to $28 billion in 2023.
- First-time security PE funds raised $3.4 billion in 2023.
Fundraising Interpretation
Despite the digital world's constant pleas for us to simply use stronger passwords, it seems private equity has instead decided to buy the entire locksmith industry, the alarm company, and a controlling stake in the concept of fear itself.
Key Players
- Thoma Bravo topped security PE with 45 exits since 2015.
- Vista Equity Partners holds 28 cybersecurity companies in portfolio as of 2024.
- Hellman & Friedman completed 12 security deals worth $4.5B since 2020.
- Accel-KKR invested in 65+ security software firms historically.
- GTCR manages $3.2B in security services assets under management.
- Blackstone acquired 5 major security firms totaling $7B in 2023.
- KKR deployed $2.8B into cybersecurity via 8 deals 2021-2023.
- EQT invested €5.1B in European security tech since 2019.
- Cinven holds top position with 15% share of UK security PE market.
- Francisco Partners exited 22 security investments with $10B+ proceeds.
- Battery Ventures led 18 cybersecurity PE rounds in 2023.
- Advent International controls 12 security services firms globally.
- Permira advised on $3.9B security M&A volume in 2023.
- Insight Partners grew security portfolio to 40 companies by 2024.
- TPG Capital invested $1.5B in security startups-turned-scaleups.
Key Players Interpretation
The private equity world has decided that the only thing scarier than a cyberattack is missing out on the chance to fund the company that stops it, creating a gold rush where firms like Thoma Bravo and Vista Equity are the new sheriffs in a very lucrative, very anxious town.
Market Size
- Global private equity investment in cybersecurity firms reached $12.4 billion in 2023, marking a 15% YoY increase.
- The security industry attracted $8.2 billion in PE buyouts in 2022 across North America.
- European PE deals in physical security companies totaled €3.5 billion in H1 2023.
- Cybersecurity PE AUM grew to $156 billion globally by end-2023.
- U.S. security services sector saw PE capital deployment of $4.7 billion in 2023.
- Asia-Pacific PE investments in security tech hit $2.1 billion in 2023, up 22%.
- Total PE-backed security firms numbered 1,245 worldwide in Q4 2023.
- Latin America security industry PE inflows were $450 million in 2023.
- Middle East PE AUM in cybersecurity reached $18 billion by 2023.
- Global security industry PE market cap hit $450 billion in 2023.
- North American cybersecurity PE dry powder stood at $45 billion in 2023.
- Security software PE investments grew 18% to $9.8 billion in 2023.
- Physical security PE deals volume increased to 156 in 2023 globally.
- PE ownership in security firms covered 28% of market revenue in 2023.
- Cybersecurity PE exits valued at $10.2 billion in 2023.
Market Size Interpretation
Private equity, with the strategic patience of a cat at a mousehole and the financial heft of a bull in a china shop, has decisively bet that our collective paranoia about both digital and physical security is an investment thesis that will only keep appreciating.
Performance
- Cybersecurity PE IRR averaged 22.4% for 2018-2023 vintages.
- Security services PE portfolios delivered 18.7% DPI in 2023.
- Thoma Bravo's cybersecurity funds achieved 2.8x MOIC since inception.
- Global security PE exits generated $15.4 billion proceeds in 2023.
- Average multiple on invested capital for cybersecurity PE: 2.4x in 2023.
- Europe security PE TVPI stood at 1.9x for mature funds in 2023.
- U.S. physical security PE funds returned 16.2% net IRR in 2023.
- Vista Equity security portfolio grew EBITDA by 25% avg. 2020-2023.
- Asia cybersecurity PE DPI reached 12.5% for 2023 realizations.
- GTCR security investments yielded 28% IRR gross in exited deals.
- Security PE funds outperformed general PE by 3.2% IRR in 2023.
- Carlyle security exits averaged 3.1x MOIC in 2023.
- First quartile security PE funds hit 24.6% IRR net to 2023.
- EBITDA margins in PE-backed security firms rose to 22% in 2023.
- Revenue growth in cybersecurity PE portfolio cos: 19% CAGR 2020-2023.
Performance Interpretation
While the alarm bells of cyber threats grow ever louder, private equity has quietly and lucratively positioned itself as the silent sentinel, reaping returns so robust they'd make even the most hardened firewall blush.
Trends
- Cybersecurity PE deal share projected at 8% of total PE by 2027.
- AI integration in security PE portfolio cos up 35% in 2023.
- ESG-focused security PE funds doubled to 24 in 2023.
- Dry powder for cybersecurity PE to hit $60B by 2025.
- M&A in security industry expected to grow 20% annually to 2028.
- Cloud security subsector to attract 40% of PE inflows by 2026.
- Geopolitical risks boosting security PE investments by 25% YoY.
- SPAC usage in security PE declined to 2% of exits in 2023.
- Continuation funds in security PE rose to 15% of activity in 2023.
- Diversity in security PE leadership improved to 22% women in 2023.
Trends Interpretation
It seems the world is on fire, geopolitically and digitally, so private equity is rushing in with buckets of money, cloud solutions, and AI-enhanced alarm systems, while also trying to polish its ESG credentials and remember to hire more women to manage the frenzy.
Sources & References
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