The bear run in global stock markets is being blamed for a round of valuation reductions for cybersecurity companies by investment banks, and influencing financial plans. Cloudflare’s plans for an initial public offering have changed, and some analysts are expecting industry consolidation in 2016 through mergers and acquisitions.
Cloudflare CEO Mathew Prince told Bloomberg in early 2015 that the company was valued at over $1 billion and that he was planning for a 2017 IPO, but Prince told the Wall Street Journal that he now estimates his company is more likely to go public in 2019.
In a late February update Fidelity, a lead investor in CloudFlare, lowered its valuations for several companies it has invested venture capital in, including Cloudflare, which was reduced by 30.55 percent, Fortune reports. Prince said that while his company is still profitable, and has 80 percent of its total funding in the bank, market conditions will delay its IPO.
“Two months ago, I would have said we were 18 months away from going public but now, with the market the way it is, it’s more like 36 months,” he said.
Dropbox (-10.34 percent) was among several other tech companies Fidelity reduced its valuations of; Morgan Stanley also cut its valuation of Dropbox by 25 percent, according to the Silicon Valley Business Journal.
451 Research’s Tech M&A Outlook for 2016 shows investment bankers split on whether there will be “somewhat more” or “substantially more” spent on cybersecurity acquisitions this year. There were 133 security M&A deals in 2015, up from 104 in 2014. MarketsandMarkets predicts the global cybersecurity market will grow by 9.8 percent CAGR to over $170 billion by 2020, but 451’s Brenon Daly told the Journal that the industry is highly fragmented into niche products, causing extra work for CIOs.