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The Wire Sept. 1, 2021
PE firms flock to cybersecurity investment opportunities despite industry vulnerabilities; 3i Group launches new biologics-focused CDMO
Good morning, readers!
Today we’ve got a fascinating and timely deep dive from Milana Vinn on the proliferation of private equity investment in cybersecurity, which has surpassed more than $135 billion in deal value, including both buyouts and growth equity investments, since 2016, according to data compiled by PitchBook. The last two years saw the biggest increase as the health crisis closed the economy.
Cybersecurity will be one of the biggest recipients of private equity and venture capital investment, but GPs and LPs have to come to grips with just how much risk is acceptable, Milana writes. “SolarWinds drew much wider attention to a problem that really has been an epidemic for quite a while,” Hugh Thompson, managing partner at Crosspoint Capital, tells PE Hub. “This trend of, ‘How do we ensure the integrity of the platform that we’re working on,’ is such a critical one,” he says.
The hack of SolarWinds, the full extent of which came into the public awareness in April, revealed that not even the highest levels of the US government are safe from cyber intrusions. SolarWinds was backed by Silver Lake and Thoma Bravo. The two firms cashed out of their interests in the companies one day before the hack was publicly revealed, selling a 5 percent stake to Canada Pension Plan Investment Board.
For more insights from Crosspoint’s Thompson and Greg Clark, Thoma Bravo's Seth Boro, Bain Capital's Max de Groen, West Monroe’s Sean Curran and ContinuServe’s Paul Lennick, check out Milana’s feature on PE Hub.
Read the full wire commentary on PE Hub...
Also of note (may require subscriptions) From scratch: Adding to its long investment track record across the pharmaceutical supply chain, 3i Group has joined hands with biotech veteran Dr. Hanns-Christian Mahler to launch an integrated but specialized biologics-focused contract development and manufacturing organization (CDMO), the firm told PE Hub. “It’s a market where we believe that building a business we want to own may require being creative where we want to do it – and in how we do it,” Richard Relyea, co-head of 3i’s North American Private Equity team, told PE Hub. The newly formed company, ten23, is based in Basel, Switzerland. Read it on PE Hub.
Fundraising: Industrial Opportunity Partners is maintaining its slow and steady growth as it works to raise its next flagship pool. The Illinois firm, formed in 2005, is targeting $600 million for its fourth fund, sources told Buyouts. That would be a modest increase from the third fund, which closed on $450 million in 2017. Read it on Buyouts.
Target: Abry Partners is seeking $625 million from investors for its second fund targeting investments in lower midmarket companies, WSJ reports, citing people familiar with the fundraising efforts. Read it on WSJ.
PE Deals
They said it “It is a difficult space for an investor that is a sector tourist,” Clark says. “If you’re opportunistically investing in a cyber company – be careful because you can get companies that are solving a piece of tradecraft and as soon as it’s solved and people start getting caught, bad actors stop doing it, and so those cyber companies stop growing.” Greg Clark, co-founder of Crosspoint Capital and former CEO of Symantec, speaks to PE Hub on investment activity in cybersecurity.
Today's letter was prepared by Sarah Pringle Subscribe now to get full, unlimited access to all PE Hub content, including every PE Hub Wire article. FIND OUT MOREPlease visit Buyouts for the latest insight into LP activity and Venture Capital Journal for comprehensive coverage and analysis of what’s happening in VC.
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