Demand for M&A insurance grows

BY Richard Summerfield

There has been a notable increase in demand for M&A insurance, according to a new report from Aon.

The report, ‘Insurance for M&A: a coming of age and an exciting future ahead’, notes that following a decline in M&A activity after the 2008 financial crisis, the volume of deals reached pre-recession values in 2015 and has increased ever since. The recent economic environment has been favourable for M&A, as interest rates have remained low, company balance sheets are stronger, and deal activity has risen significantly among private equity firms.

According to the report, 3200 deals were transacted globally using warranty and indemnity (W&I) insurance in 2018. W&I insurance is the largest insurance product by premium volume, however buyers and sellers are also looking to tax insurance, litigation and contingency insurance, and bespoke products that include environmental or cyber policies. The market value for transactional liability solutions reached $2.3bn in 2018, a 35 percent increase from 2014.

“Buyers, sellers, and legal and professional service firms are fully aware of the value of insurance during the transaction process, and this has culminated with improved infrastructure within the insurance market,” said Alistair Lester, chief executive of Aon M&A and Transaction Solutions for EMEA. “Insureds now have access to more sophisticated products, a wider choice of providers, larger coverage limits, lower premiums, and services such as capital advisory and consultancy.”

“For an insurer or an MGA, working out how best to capture the opportunities begins with an understanding of the likely evolution of the marketplace. We have developed forecasts for the growth of the marketplace in Europe, including the products that will dominate, evolutions in coverage and how local markets will operate,” said Rohan Dixon, chief executive and president of Aon Inpoint. “This enables us to help insurers identify where the opportunities are, how to access them and how they can improve their capabilities and offerings to better serve buyers and sellers in the M&A environment.”

Report: Insurance for M&A: a coming of age and an exciting future ahead

Cyber security M&A intensifies as attacks increase

BY Fraser Tennant

Cyber attacks continue to be one of the most dangerous threats to businesses in all industries, with their number and complexity growing rapidly, according to a new report by Hampleton Partners.

In addition to this rapid increase, global digitalisation, new regulations, high-profile incidents and new technologies have led to an increasing number of cyber security acquisitions over the past two years, with deal volume well above those typically seen for enterprise software or IT services.

Setting the tone for an uptick in deal volume  and continuously strong valuations was the cyber security sector’s largest ever deal: Broadcom’s landmark acquisition of Symantec for $10.7bn in August 2019.

In its ‘M&A market report 2H 2019: Cybersecurity’, Hampleton Partners cites three key trends impacting the race to secure cyber security vendors: (i) an exponential increase in the number of devices connected to enterprise Internet of Things (IoT) networks, providing potential entry points for cyber attackers; (ii) growing volumes of personal data that needs to be secured; and (iii) mounting regulatory and financial penalties for cyber insecurity.

“The number of cyber attacks, as well as their complexity, is growing rapidly,” said Axel Brill, a director at Hampleton Partners. “Cyber security vendors will have to move quickly to keep ahead of malware and hackers.

“Cyber attacks are some of the most dangerous threats for businesses across all sectors and industries, demanding management time and increased investment in technologies like artificial intelligence (AI) to protect against vulnerabilities,” he continued. “There is no doubt that AI-focused cyber security vendors will be the most sought-after future M&A targets in this sector.”

The report also notes that cyber security transaction volume rose by 15 percent in the second-half of 2019 compared to 2H 2017. Valuations have also remained healthy, significantly above those seen in the wider enterprise software space.

Report: M&A market report 2H 2019: Cybersecurity

Blackstone takes £3bn majority stake in MagicLab

BY Fraser Tennant

As part of its push to invest in companies with robust growth profiles, PE firm Blackstone is to acquire a majority stake in dating app startup MagicLab for $3bn.

Founded in 2006 by its chief executive Andrey Andreev, MagicLab’s suite of brands – which includes the dating and social networking apps Bumble and Badoo – has connected and transformed the lives of over 500 million people around the world across dating, social and business.

Constantly seeking new ways to drive long-term growth, Mr Andreev has been at the forefront of innovation in the dating industry and has continued to invest in finding the most talented entrepreneurs and tech visionaries to mentor.

“Blackstone presented MagicLab with a great opportunity to further develop the brands and platform, and I am confident Blackstone will take MagicLab to the next level in terms of growth and expansion,” said Mr Andreev. “I am incredibly proud of the company, and of how we have connected millions of people around the world.”

As part of the acquisition, Mr Andreev will be selling his stake and stepping down from the business. He will be replaced as chief executive by Whitney Wolfe Herd, founder and chief executive of Bumble, who, together with Blackstone, will work to accelerate the business’ growth even further.

“At MagicLab, I have had the pleasure of working with some of the best and most talented entrepreneurs,” continues Mr Andreev. “My aim now is to ensure a smooth and successful transition before I embark on a new business venture in search of innovative leaders with new and exciting ideas. I am grateful for all the support of my partners and employees over the years as we could not have gotten to this point without them. I wish MagicLab and Blackstone every success.”

Mr Wolfe Herd added: “This transaction is an incredibly important and exciting moment for Bumble and the MagicLab group of brands and team members. Blackstone is world-class at maximising the success of entrepreneur-led companies, which presents a tremendous opportunity.”

Martin Brand, a senior managing director at Blackstone, concluded: “We look forward to partnering with MagicLab to help fuel the company’s continued expansion in the years ahead.”

News: Blackstone acquires dating apps Bumble, Badoo

Bridging the cyber skills gap

BY Richard Summerfield

The current cyber security workforce must grow by 145 percent if the industry is to close the skills gap and better defend organisations worldwide, according to the 2019 (ISC)² Cybersecurity Workforce Study.

The report, which was designed to estimate the total current number of cyber security professionals in the US and 10 other major global economies, suggests that while most cyber security and IT professionals in the market are largely satisfied with their career and remain optimistic about their future in the industry, there is a substantial gap between the number of cyber security professionals working in the field and the number needed to keep organisations safe.

Understandably, the gap is not the same across all markets. In the US, for example, the current cyber security workforce estimate is 804,700 and the shortage of skilled professionals is 498,480, requiring an increase of 62 percent to better defend US organisations. The study is based on online survey data from 3237 individuals responsible for security or cyber security throughout North America, Europe, Latin America and Asia-Pacific.

“We’ve been evolving our research approach for 15 years to get to this point today, where we can confidently estimate the current workforce and better understand what it will take as an industry to add enough professionals to protect our critical assets,” said Wesley Simpson, chief operating officer at (ISC)². “Perhaps more importantly, the study provides actionable insights and strategies for building and growing strong cybersecurity teams. Knowing where we stand and the delta that needs to be filled is a powerful step along the pathway to overcoming our industry’s staffing challenges.”

According to the report, 65 percent of organisations suffer from a shortage of cyber security staff and a lack of skilled or experienced cyber security personnel is the top job concern among respondents.

If organisations are to close the skills gap, they must not only look to train and develop existing employees, but also attempt to recruit individuals from outside the industry.

Report: 2019 (ISC)² Cybersecurity Workforce Study

Stryking the Wright deal

BY Richard Summerfield

Medical device manufacturer Stryker Corp has announced that it will acquire smaller rival Wright Medical Group in a deal worth $5.4bn, including convertible notes.

Under the terms of the deal, Wright shareholders will receive $30.75 in cash per share, giving the deal an equity value of $4bn. The agreed price represents a premium of 39.7 percent to the company’s close price on Friday. The boards of both companies have approved the deal, which is expected to close in the second half of 2020, subject to customary closing conditions and pending regulatory approval.

“This acquisition enhances our global market position in trauma & extremities, providing significant opportunities to advance innovation, improve outcomes and reach more patients,” said Kevin Lobo, chairman and chief executive of Stryker. “Wright Medical has built a successful business, and we look forward to welcoming their team to Stryker.”

“We believe this transaction will provide truly unique opportunities and will create significant value for our shareholders, customers and employees,” said Robert Palmisano, executive director, chief executive and president of Wright Medical. “By merging our complementary strengths and collective resources, we will be able to advance our broad platform of extremities and biologics technologies with one of the world’s leading medical technology companies that shares our vision of delivering breakthrough and innovative solutions to improve patient outcomes.”

By acquiring Wright Medical, Stryker will expand its “trauma and extremities business” through Wright Medical's “highly complementary product portfolio and customer base”, the companies said in a statement. Stryker also believes the deal will strengthen its trauma and extremities business in “the fastest growing segments in orthopaedics”.

Founded in 1950, Wright Medical manufactures implants to treat injuries to parts of the body including the shoulders, elbows and ankles, and has recorded global sales approaching $1bn.

The deal is the latest in a series of mergers in the medical device industry. In recent years, 3M agreed to buy wound-care maker Acelity for $6.7bn including debt, and Boston Scientific acquired BTG for £3.3bn in cash. 

News: Stryker boosts bone implants with $4 billion Wright Medical buyout