Investors flock to growing security sector

Dec. 6, 2011 at 2:49 PM
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WASHINGTON, Dec. 6 (UPI) -- Global investment in security industries is growing and is worth at least $60 billion, the latest analysis of trends in the sector by PricewaterhouseCoopers reported.

More than half of that business was generated in the United States but business is growing worldwide.

Analysts said the PwC report pointed to aggressive marketing by security companies mindful of their market share amid recessionary trends worldwide and global public response to media reports that continue to highlight risks to personal, institutional and government security.

Recent growth in the security sector attracted investors from other areas usually not interested in the line of business, including equity players.

The security industry business began to rise after the Sept. 11, 2001, attacks on the United States and subsequent terrorism and cybercrime incidents.

Global cybersecurity spending is forecast to grow 10 percent every year in the next three to five years, PwC said.

The global worth of deals since 2008 exceeded $22 billion and, in the first half of 2011, 37 deals accounted for more than $10 billion, a 70 percent increase when compared to all of 2010, PwC said.

The company said that in most regions the private sector accounts for most of cybersecurity spending. A notable exception is the U.S. government sector, which spends about as much as the U.S. private sector on cybersecurity projects.

This trend is driven by the fact that a strong U.S. technology industry combines with significantly larger U.S. defense and intelligence budgets than in any other country.

PwC's report cites the cybersecurity industry's position that cyberthreats are on the increase, both from new sources and from new threat vectors -- the paths that attacks can take.

A more pervasive use of technology, particularly mobile devices and cloud computing, has made the global community more vulnerable, PwC said.

Increased awareness by organizations and consumers of the threats and potential threats has also led to growth.

Changes in outsourcing, with organizations increasingly relying on partners for security and others spending more to maintain greater levels of control have also boosted the industry's fortunes, with the result that it is a hot sector for a range of investors, including mainstream IT companies, aerospace, defense giants and private equity.

The value growth has also been driven by rivalries among cybersecurity companies and mergers and acquisitions.

PwC said investor interest in the security industries would likely continue despite the economic downturn.

Private equity and the wider investor communities are drawn to the security industry because of recent growth in profits and have turned their attention to the sector for profit.

Likewise, publicly quoted security companies attracted investors as the price-earnings multiples rose within a relatively short time.

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