Cybersecurity & Industrial Technology Market Update: Converging Systems, Heightened Vulnerability Drive Cybersecurity Integration in Industrial Technologies

The Union of Cybersecurity and Industrial Technology Has Initiated Cross-Sector M&A Activity

Capstone Partners released its May 2022 Cybersecurity & Industrial Technology Market Update, the firm’s premier cross-sector report, with commentary and analysis on how the Industrial Technology sector continues to be categorized by the evolution of Internet of Things (IoT)-enabled devices for operational technology and industrial control systems. While the converging technology has brought significant revenue opportunities to the sectors, it has also invited hacker groups and certain nation-states to weaponize digital industrial environments through malware and exfiltrate sensitive data for ransom. Cybersecurity has played an active role in safeguarding Industrial Technology sector participants from cyber attacks through software and service offerings. The unification of these two sectors has initiated cross-sector merger and acquisition (M&A) activity and venture capital financing rounds. Both Cybersecurity and Industrial Technology players are expected to benefit from the union, with a larger total addressable market driving elevated levels of revenue and buyer and investor appetite.

In the Cybersecurity M&A market, there has been significant vertical consolidation of industrial cybersecurity specialists to gain scale and meet heightened demand, with heavy interest from private equity-backed buyers. Large public industrial technology players have also engaged in cybersecurity acquisitions, bolstering in-house divisions dedicated to protecting proprietary systems. In the Industrial Technology M&A market, private equity firms have targeted providers with value-added cybersecurity services in direct investments, aiming to position the platform as a full-service integrator when looking for add-on acquisitions.

Publicly traded industrial technology companies have deployed significant levels of venture capital into pure-play industrial cybersecurity businesses. These investments have often strengthened the partnership between the two entities, with industrial technology providers incorporating advanced cybersecurity software tools to complement service offerings. The Warehousing Technology sub-segment has been at the forefront of industrial technology venture capital financing, as leading providers have implemented cybersecurity measures to shield proprietary software from potential breaches. These measures not only protect the data collected, but the accompanying robotics orchestrated by the platform.

Also included in this report:

• Top cybersecurity capabilities for industrial technology providers
• Recent, notable cyber attacks on industrial facilities
• How the convergence has impacted the Cybersecurity M&A market, venture capital funding activity, and public markets
• What steps industrial technology providers have taken to mitigate cyber risks, including engaging in M&A, financing rounds, and strategic partnerships