Protecting Shareholder Value: Cyber Security, AI, and M&A

At our recent Insider Editor’s Briefing, cyber security industry leaders gathered to discuss the evolving threat landscape, the increasing role of AI in both defence and attack, and how businesses should prepare for an uncertain future.

Cyber Security: An Unseen Necessity

Unlike traditional business investments where ROI is more demonstrably clear, cyber security is unique in that its success is measured by the absence of incidents. It’s an insurance-like function; if executed well, nothing happens. However, demonstrating its everyday value remains a challenge, especially for businesses that don’t operate in highly regulated environments. While large corporations and critical infrastructure providers have long prioritised cyber resilience, many leaders of SMEs still see it as a ‘should have’ rather than a necessity – until they experience an attack.

The prevalence of sophisticated attacks is growing and the reality is stark: cyber breaches are not a question of if, but when. Businesses are often affected indirectly, becoming collateral damage in broader cyber campaigns targeted elsewhere. The consequences go far beyond financial loss, affecting reputation, operational downtime, and even physical assets.

The Changing Nature of Threats and AI’s Role

The cyber threat landscape is undergoing an unprecedented evolution. Ransomware-as-a-service is growing at an alarming rate, and AI-driven attacks are becoming more sophisticated. As AI is increasingly used to generate threats, businesses must also leverage AI-powered defence systems to keep pace. However, protection is never static. Security measures that are robust today risk obsolescence within weeks. This means security strategies must be agile, balancing immediate risk mitigation with long-term resilience.

A recurring theme in the discussion was the pressing need for a universally accepted baseline of cyber security controls. Some argued that cyber protection should be regulated in the same way as health and safety, with clearer legal obligations for businesses. Others suggested that cyber security should be embedded in business insurance models, ensuring a baseline level of protection across industries.

Cyber Security and Business Value: Preparing for M&A

For businesses considering investment or an exit, cyber security is now a critical factor in due diligence. Investors and acquirers are placing greater emphasis on digital resilience, recognising that a weak cyber strategy can pose significant risks to business continuity and valuation.

Accreditations such as ISO 27001 and Cyber Essentials Plus (and the adoption of related business processes) not only improve security posture but also enhance a company’s attractiveness to buyers. A demonstrably mature approach to cyber security can streamline due diligence, provide assurance to investors, and ultimately add shareholder value as part of a transaction.

The cyber security M&A landscape has experienced pronounced fluctuations, reflecting broader market dynamics and shifting investor priorities.. After a quiet few years, the last few months have seen a significant uptick in deals, driven by increasing demand for innovative security solutions and the ongoing arms race between cyber threats and defences. Successfully navigating these deals requires advisors who not only understand emerging risks but also recognise how robust cyber security and AI capabilities can enhance business value, improve deal attractiveness, and drive stronger M&A outcomes.

The valuation metrics applied to different cyber security businesses vary widely. For example: 

• Low single digit profit multiples can be applied to sub-scale basic cyber services providers with simple offerings, low differentiation versus competitors and concentration of revenue within a couple of key customers; whereas
• Double digit revenue multiples can be applied to large fast-growing cyber software providers with registered intellectual property, SaaS revenue models, compellingly strong growth profiles and diversified, multi-national customer landscapes (the February 2025 IPO of SailPoint Technologies being a good recent example)

Looking Ahead

With AI-driven threats, regulatory developments, and rising investment in cyber security solutions, the landscape will continue to shift. Cyber security must be reframed not as a discretionary operational expense, but as a fundamental pillar of corporate strategy, underpinning both resilience and long-term enterprise value.

At Headpoint, we work with businesses to ensure they are well-positioned for investment and M&A, considering and helping clients mitigate all aspects of risk, including cyber resilience. For more insights into how security readiness impacts business transactions, get in touch with our team.