Market insight: The cyber security and I.T. infrastructure sector

By Magdalena Barczak

Remarkable growth is occurring in the UK cyber security and I.T. infrastructure industry, with company sales activity on the rise.

The sector encompasses providers of essential tools and services that protect organisations’ digital assets, optimise I.T. operations and enable seamless infrastructure management. This includes solutions for threat detection, data protection, network monitoring, cloud optimisation and enterprise software integration.

KBS Corporate’s extensive experience in managing successful transactions, allied to our ongoing engagement within this dynamic market, has provided us with a unique perspective, generating the following insight.

Key drivers and motivations for acquirers

Integration of technologies, such as the Internet of Things (IoT), Machine Learning and Cloud, to drive market growth

Due to a rise in I.T. security threats, and hence the increased importance of I.T. security, companies need to invest in safer and more resilient systems.

Core technologies, such as the Internet of Things (IoT), Machine Learning (ML) and Cloud, along with big data, are being utilised in security systems. Artificial Intelligence (AI) is also helping to detect certain threats. The adoption of these technologies, in particular IoT, is a recent emerging trend. The I.T. security market is growing due to:

The increasing importance of data privacy
Cyber security transformation due to AI and ML
Business strategy and security integration
Growing zero-trust architecture and approaching methods

PE involvement is high – however, trade buyers are entering the market

Private equity still accounts for most transactions in this sector, but the increasing percentage of non-PE deals demonstrates that trade buyers are returning to the market.

PE firms are pursuing a buy-and-build platform strategy for bolt-on acquisitions, focusing on acquiring new capabilities and expanding into new markets.

Trending: Cyber security

Cybercrime was predicted to cause $9.5tn of damage in 2024. As a result of the COVID-19 pandemic, many organisations had been left vulnerable to an increase in cyber security attacks. This can be attributed to more remote work taking place, as well as the shift to virtualised I.T. environments such as the infrastructure, data and network of cloud computing.

Furthermore, global tensions, such as the Russia-Ukraine war, continue to accelerate cyber security spending and to sharpen organisations’ priorities.

Venture capital funding rises

Venture capital (VC) funding for cyber security companies rose 97.4% year-on-year in 2024 to $7.5bn. Moreover, deal volume also increased, rising 21.2% YOY to 446 VC-funded transactions, and is forecast to continue growing.

EBITDA multiple ranges in this sector

For companies operating in the UK cyber security and I.T. infrastructure sector, EBITDA multiples have generally ranged between 10x and 15x, with some premium deals achieving even higher valuations.

Key valuation drivers include:

Cyber security specialists: Businesses offering advanced threat detection, incident response and managed security services often achieve multiples of 12x-15x, reflecting the critical importance of these services in the modern digital landscape.

Cloud and infrastructure software solutions: Companies focused on cloud infrastructure management, DevOps tools and SaaS-based IT management platforms typically see multiples between 10x and 13x, with growth potential influencing the valuation.

Recurring revenue models: Firms with subscription-based or licensing revenue streams often achieve valuations at the higher end of the range due to predictable income and client retention. Predictable income streams reduce revenue volatility, making these companies attractive to investors.

Factors driving higher valuations and EBITDA multiples in this sector

The cyber security and I.T. infrastructure and software solutions sector’s valuation metrics are driven by several critical factors that highlight scalability, innovation and market relevance:

Specialisation in high-demand segments (cyber security, Cloud and AI): Companies specialising in areas such as ransomware prevention, endpoint protection, cloud management tools and AI-driven threat intelligence attract premium valuations. These services align with high-priority needs for businesses undergoing digital transformation.

Scalability and growth potential: Investors value firms with scalable solutions, particularly those that integrate seamlessly with existing enterprise systems or offer cross-industry applicability. Businesses with a global client base or high potential for geographic expansion tend to see higher multiples.

Operational efficiency and profit margins: Strong EBITDA margins are a key driver of value. Efficient operations, automation in service delivery and minimal customer churn are significant factors that boost profitability and overall valuation.

Innovation and technological differentiation: Firms offering unique, patent-protected or highly differentiated technologies — such as zero-trust architecture, AI-driven automation or bespoke software solutions — command higher multiples. Innovation is particularly valuable in combating emerging cyber threats or addressing complex I.T. challenges.

Private equity and strategic consolidation trends: The sector is highly fragmented, driving strong interest from private equity firms and larger consolidators. These acquirers are actively pursuing niche providers to integrate into broader portfolios, enhancing value through economies of scale or complementary offerings.

Strategic interests of private equity and investment buyers

The cyber security and I.T. infrastructure sector is attracting significant interest from private equity (PE) and investment buyers. This heightened attention is driven by the sector’s rapid growth potential, its critical role across multiple industries and ongoing market consolidation efforts.

High growth potential: The cyber security market is experiencing significant demand due to the rise in cyber threats, which makes it an attractive space for investors seeking substantial returns. With society’s ever-growing reliance on technology, the demand for robust cyber security solutions continues to grow, offering lucrative opportunities for investors.

Market consolidation: Private equity firms can leverage their capital to acquire and consolidate smaller cyber security companies. This creates larger, more comprehensive platforms with greater market reach and operational efficiencies. Consolidation can also lead to improved pricing power and enhanced competitive positioning.

Operational improvements: Private equity firms rely on their expertise in operational efficiency which they can utilise to optimise the cost structures of target companies. By improving sales processes, streamlining operations and enhancing profitability, PE firms can significantly increase the value of their investments.

Add-on acquisitions: Once a core cyber security platform is established, private equity firms can further expand their product portfolio through strategic add-on acquisitions. These acquisitions can bring complementary technologies or services, enhancing the overall value proposition and market presence of the portfolio company.

Industry expertise: Identifying and investing in companies with innovative cyber security solutions, especially those addressing emerging threats, is crucial for success. Investors seek companies with strong intellectual property, skilled management teams and a track record of innovation.

Risk mitigation: Due diligence and proactive cyber security measures are critical for managing cyber risks within portfolio companies. Implementing advanced security protocols and continuous monitoring helps protect investor value and ensure compliance with industry standards.

The strategic interests of private equity and investment buyers in this sector are driven by the need to protect investments, capitalise on growth opportunities and foster innovation. By prioritising cyber security and leveraging their expertise, PE firms can enhance their competitive edge and ensure the long-term success of their portfolio companies.

What types of businesses are strategic acquirers pursuing?

The landscape in this sector is evolving rapidly, driven by increasing cyber threats, cloud adoption and stringent regulatory requirements. As organisations strive to protect their digital assets, strategic acquirers are actively seeking opportunities to enhance their capabilities and expand market reach.

Key areas of interest for strategic acquirers are:

Managed Security Services Providers (MSSPs): With cyber threats becoming more sophisticated, businesses are outsourcing their security operations to managed security services providers (MSSPs). Companies offering 24/7 threat monitoring, incident response and security analytics are highly attractive acquisition targets. Acquirers seek MSSPs with strong automation capabilities, AI-driven security operations and expertise in cloud security to meet the growing demand for scalable, proactive defence.

Identity and Access Management (IAM): The rise of remote work and hybrid cloud environments has fuelled the demand for robust IAM solutions. Strategic buyers are targeting firms specialising in multi-factor authentication (MFA), single sign-on (SSO), privileged access management (PAM) and zero-trust security frameworks. Companies with innovative identity verification and behavioural analytics capabilities are especially appealing.

Cloud security and Secure Access Service Edge (SASE) solutions: As businesses transition to cloud-based infrastructures, security threats targeting cloud environments are increasing. Acquirers are actively seeking firms offering Secure Access Service Edge (SASE), cloud-native security platforms and advanced cloud workload protection. Businesses that provide seamless integration with major cloud providers (AWS, Azure, Google Cloud) are in high demand.

Endpoint and network security: Endpoint security remains a priority due to the growing number of remote devices and ever-evolving ransomware threats. Companies offering Extended Detection & Response (XDR), Endpoint Detection & Response (EDR) and AI-driven threat detection are prime acquisition targets. Similarly, businesses with network security innovations, such as next-generation firewalls and intrusion prevention systems, are seeing increased interest.

Compliance and risk management solutions: With global data privacy laws (GDPR, CCPA, HIPAA, etc.) becoming stricter, enterprises need compliance-focused security solutions. Acquirers are investing in firms that provide automated compliance management, risk assessment tools and regulatory reporting solutions to help organisations navigate complex legal landscapes.

Threat intelligence and incident response: The ability to anticipate and respond to cyber threats in real time is crucial. Companies specialising in threat intelligence, advanced analytics and rapid incident response are key acquisition targets. Firms that leverage Machine Learning for predictive threat detection or provide tailored threat intelligence reports are especially valuable.

IT infrastructure and managed services: With digital transformation accelerating, enterprises are seeking robust IT infrastructure and managed services solutions. Acquirers are looking for firms offering hybrid cloud management, secure IT operations and Infrastructure-as-a-Service (IaaS) to support the growing need for scalable IT environments.

As cyber security threats continue to evolve, strategic acquirers are prioritising businesses that offer cutting-edge technology, automation and scalable solutions.

The M&A market in this sector remains highly active, with strong interest in companies that provide comprehensive security, compliance and managed IT services. Organisations positioned at the forefront of cyber security innovation will continue to attract strong acquisition interest as digital security becomes an ever-greater business imperative.

Which companies in this sector have been sold by KBS?

Mitigate Cyber acquired by Citation Group

Mitigate Cyber, a trusted and highly reliable provider of cyber security services which offers testing, training and certification services across the UK through its innovative hub, was sold to Citation Group – which was making its sixth acquisition in less than two years.

Tellemachus acquired by Bedroq

Tellemachus, a long-standing provider of I.T. technology solutions with an enviable blue-chip client base, was sold to Bedroq, which continued its acquisition-via-growth strategy and extended its geographical footprint to Glasgow.

At On Line Computing acquired by Tela Technology

At On Line Computing, a London-based provider of IT and information security managed services to SMEs in the UK, was sold to Tela Technology, a communication solutions and IT business services company which benefits from partnerships with multiple blue-chip companies and offices across the UK and wanted to diversify its service offerings.

Phenna Group investment into IASME Consortium

IASME, which is committed to helping businesses improve their cyber security, risk management and governance through an effective and accessible range of certification schemes, received multi-million pound investment from Phenna Group, an investor and partner in selected niche, independent Testing, Inspection, Certification and Compliance (TICC) companies that serve a variety of sectors.

If you have a company within the cyber security and I.T. infrastructure space, contact us to learn more about the range of investment and exit options available.