Defense of the realm: South Korea’s new leadership targets cybersecurity boom

Data Insight Dealspeak 25 May

Defense of the realm: South Korea’s new leadership targets cybersecurity boom

An explosion in demand for non-face-to-face meetings and remote work in the wake of the coronavirus (COVID-19) pandemic has reinforced the high growth potential of the cybersecurity industry globally. South Korea, in particular, sees ballooning interest as an opportunity to ramp up investment and accelerate sector development. A new administration, marshalled by president Yoon Suk-yeol, is pledging to create a National Cybersecurity Agency to act as a control center, as the country strengthens related intelligence units and builds out world-class security in both the public and private sectors.

Cybersecurity M&A activity has yet to take off across the Asia-Pacific region. In 2021, APAC recorded six deals for USD 140.8m in the sector, representing only 0.42% of the value of the global market, compared with the Americas (71 deals; USD 22.97bn) and EMEA (56 deals; USD 10.4bn), according to Dealogic data. Between 2012 and 2022 year to date (YTD), APAC aggregated 33 transactions worth USD 1.08bn, with China (six deals; USD 980m) and Australia (10 deals; USD 15m) ahead of the pack by value and volume, respectively.

Patriot games: South Korean big business is turning fire towards cyber threat

South Korea has fired blanks in terms of deals in recent years, but LG Electronics’ [KRX:066570] acquisition of Cybellum, an Israel-based vehicle cybersecurity developer, for USD 140m in September 2021 suggests a strategic shift in big businesses’ attention towards digital security. Alongside security solutions providers, large companies in autonomous vehicles, industrial automation, and defense businesses are on the hunt for investment opportunities to equip digital security technology on internal platforms, say sector bankers.

The domestic cybersecurity market is only going to get bigger, as IT, cloud, metaverse, and non-fungible tokens (NFTs) garner widespread attention, according to a spokeswoman at SK shieldus, a South Korean total security solutions provider, part of SK Group, the country’s third-largest conglomerate.

Over the past three years, cybersecurity industry sales in South Korea have seen steady growth, rising from USD 3.3bn in 2019, to USD 3.6bn in 2020, and USD 4.1bn in 2021. Sales are expected to rocket 40% to USD 6.9bn by 2025, according to SK shieldus’ IPO prospectus, citing a 2022 Infiniti market research report.

SK sheildus, which halted its planned IPO earlier this month, would have been the largest player in the sector if it had floated, with a minimum valuation of around KRW 2.8trn (USD 2.2bn). Other domestic peers include Anlab [KOSDAQ:053800], S1 Corp [KRX:012750], IGLOO [KOSDAQ:067920], and CyberOne [KOSDAQ:356890].

In April, SK shieldus’ CEO, Park Jin-hyo, said that proceeds from the now-shelved IPO would be used to acquire a global cloud security player in order to secure future growth. The company’s spokeswoman told this news service that its original M&A plan could be re-evaluated now that the capital raising is on hold. However, SK shieldus continues to look for investment opportunities, and has sufficient internal resources to support a potential transaction, she added.

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