You may think the time is right to move into cybersecurity stocks as private equity firms target the sector. But right now, the IBD Computer-Software Security group ranks only No. 125 out of 197 industry groups tracked.
Checkpoint Software Technologies (CHKP) kicks off a new round of earnings reports on Oct. 27.
Investors should be cautious of any buys amid the bear market and Fed rate hikes. The IBD security group is down about 34% in 2022, under-performing the S&P 500. The S&P 500 is down about 22%. Meanwhile, the iShares Expanded Tech-Software ETF (IGV) has retreated 36% in 2022.
Private Equity Firms Target Cybersecurity
PE firm Thoma Bravo on Oct. 11 agreed to buy ForgeRock for $23.25 per share in an all-cash deal valued at about $2.3 billion. The deal represented a 53% premium to ForgeRock’s closing share price on Oct. 10. The deal is expected to close in the first half of 2023. FORG stock had retreated 65% in 2022 prior to the deal.
Earlier this year, Thoma Bravo acquired Ping Identity Holdings (PING) for $2.8 billion. Thoma Bravo also has acquired cybersecurity firms SailPoint Technology, Proofpoint, Sophos and Barracuda. The private equity firm has invested in cybersecurity startups, such as Illumio.
Also, PE firm Permira in May completed its purchase of Mimecast for $5.8 billion.
“Valuation levels and renewed focus on profitability are driving M&A demand from both financial sponsors and strategic buyers,” said Cowen analyst Shaul Eyal in a report.
At William Blair, analyst Jonathan Ho said in a report: “We believe other takeout opportunities might include the likes of Tenable (TENB), Rapid7 (RPD) and perhaps even Okta (OKTA).
Private equity firm Vista Partners, a long-standing investor in KnowBe4 (KNBE), on Oct. 13 acquired KnowBe4 in a $4.6 billion leveraged buyout.
Federal Market A Tailwind?
Google-parent Alphabet (GOOGL) this year acquired cybersecurity firm Mandiant (MNDT) in an all-cash $5.4 billion deal. Mandiant is now part of Google’s cloud computing business.
Further, Google in January acquired Siemplify, a security…