Palo Alto Networks CEO Nikesh Arora has pressured many times in interviews with journalists that till seven years in the past when he was appointed to the job by CTO and founder Nir Zuk, he knew nothing about cybersecurity. “They made enjoyable of the truth that they appointed a Google veteran who would not perceive the sector and made him the CEO of a giant cybersecurity firm,” he mentioned on Wednesday at a press convention hours after asserting the acquisition.
However one enterprise precept that guided him alongside the best way teaches your entire doctrine of the cybersecurity trade: “My technique is to take the perfect firm in its area, shortly combine it into Palo Alto Networks and convey it to market in a short time together with the remainder of our merchandise – that is what I’ve at all times performed. After we purchased a browser (Israeli firm Talon), nobody understood why we did it, however in a short time we noticed different corporations like Google and Microsoft launch their very own safe browser. The identical was true within the database area and within the area of command and management facilities. I am not going to spend 4 years growing a product from scratch now, hoping that it’s going to match into the market. I am panicking about AI and we’re already behind in securing synthetic intelligence brokers.”
Arora understood that the best way to reach cybersecurity is to accumulate the businesses that lead the class, ideally when they’re nonetheless early stage and comparatively low-cost. It’s not at all times the main and costlier firm, typically it is doable to accept quantity two. This was the case, for instance, with Palo Alto’s acquisition of Israeli company information safety firm Dig Safety for $400 million (competing with Cyera, which is at present value $6 billion), and the acquisition of the safe browser firm Talon for $458 million (competing with Island, which is at present value $5 billion). These retained very high-quality groups and generated preliminary income, even when fairly small. Till this week, Palo Alto had made practically 30 acquisitions since 2013, in line with the PitchBook database, none of which exceeded the billion greenback mark. Solely earlier this month, Globes reported its acquisition of cybersecurity firm AI Defend for $700 million, simply three years after its founding.
Actually, it appears that evidently CyberArk, an organization solely 20% the dimensions of Palo Alto Networks, has been way more daring in its acquisitions. Final 12 months, it acquired its main rival Venafi for $1.5 billion.
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Palo Alto Networks can pay $25 billion for CyberArk, the huge bulk of which will likely be paid in shares. This deal is a sort of “positive” that Nir Zuk’s cybersecurity large is paying for being late to the sector of AI. As expertise advances at a dizzying tempo, so too are the vulnerabilities and the probabilities of hackers and different cyber attackers.
Palo Alto has taken acquisitions to the acute
Palo Alto Networks has taken acquisitions to the acute, however it isn’t the one main cybersecurity firm to take action. US rival CrowdStrike has made at least 41 acquisitions since 2017 – a few of them, like Adaptive Protect and Stream Safety, are Israeli firm. Veteran cybersecurity firm Fortinet has made 37 acquisitions, and Israel’s Verify Level has made 26 acquisitions. Even Wiz understood the foundations of the sport and, simply earlier than being acquired by Google in an enormous $32 billion deal, it acquired 4 corporations, the biggest of which, Gem and Dazz had been for a complete of virtually $800 million.
Not each acquisition by Palo Alto has been profitable. It acquired Israeli cybersecurity firm Cider Safety for the applying safety area, and after a 12 months, staff had been laid off. Thus far, the sector has probably not taken off throughout the firm. Palo Alto’s Prism cloud safety product is producing gross sales, however it has hit a glass ceiling and is reportedly being challenged by giants like Wiz, Orca, and CrowdStrike.
Efficiently merging corporations isn’t any simple job. Cisco acquired corporations in Israel like LightSpin and PortShift, which had been alleged to be the reply to Wiz, however had problem integrating the product into the market. Epsagon, which it acquired for $500 million, had its key staff transferred to develop different merchandise whereas it grew to become open supply. Even when merchandise don’t in the end match into the market, the workers are simply moved to different growth initiatives.
How do you grow to be a superpower: Verify Level v Palo Alto
One reality is plain. Relating to the cybersecurity market, mergers and acquisitions are shaping the trade and altering it from finish to finish. In 2023, 20 acquisitions had been made for greater than $200 million, for a complete of $43 billion. A 12 months later, the variety of offers on the excessive threshold elevated to 30, for a complete of over $35 billion. To this point in 2025, offers value $60 billion have already been closed, and that’s with out counting Amiram Shahar’s Upwind in talks to be bought for $1 billion.
These acquisitions have contributed to the creation of cybersecurity superpowers – large corporations that function a sort of division retailer the place you could find a wide range of options in a single place. “A decade in the past, the 2 largest cybersecurity corporations – Palo Alto Networks and Verify Level – had been on the prime of the biggest corporations within the area with a market worth of about $15 billion every,” says Oren Junger, managing accomplice on the enterprise capital fund Notable, which invests in cybersecurity and enterprise software program corporations, together with Israeli corporations, and has performed particular analysis on mergers and acquisitions within the area. “Palo Alto started to make extra aggressive acquisitions of small gamers that led their market, and tended to pay a whole lot of hundreds of thousands of {dollars} for corporations with single-digit annual income progress even in areas that had been outdoors its experience – company community safety.
“Verify Level, however, was extra conservative, specializing in buying much less flashy corporations and normally paying quantities starting from tens of hundreds of thousands of {dollars}, typically down to some hundred thousand. As we speak, with Palo Alto Networks value over $115 billion and Verify Level value about $20 billion, it’s clear that aggressive acquisitions of corporations with distinguished entrepreneurs and powerful expertise was a worthwhile transfer, even when it didn’t appear worthwhile at first.”
Verify Level has acquired 26 corporations through the years. It has not but purchased an organization for greater than $1 billion. One of many acquisitions by the Israeli community safety large might have been CyberArk. In 2016, it was reported that then Verify Level CEO Gil Shwed was concerned about buying CyberArk, which was then value solely $1.7 billion.
As we speak, the cybersecurity powerhouses are Palo Alto, with a market cap of $115 billion, Crowdstrike with a price of $115 billion, and Fortinet with a price of $71 billion. After dropping 15% of its worth in in the future this week, Verify Level is ranked eighth with a price of about $20 billion. “In 2015, the combination worth of cybersecurity corporations was $97 billion, right now there are a minimum of two powerhouses which are every traded for over $100 billion,” says Junger. “Strategic acquisitions have grow to be the driving pressure behind the surge in cybersecurity mergers and acquisitions, which displays rising confidence on this trade. Between 2022 and 2025, they had been chargeable for offers value over $100 billion, even earlier than the CyberArk deal.”
The logic behind the acquisitions is obvious: Whereas the trade continues to develop, with a mean annual progress charge of 19% in gross sales, the variety of cybersecurity software program merchandise utilized by the typical information safety supervisor in a US group ranges from 70 to 90 and might even attain 135 completely different merchandise, in line with Silicon Angel. Palo Alto has mastered the artwork of “bundling,” or cybersecurity packages, wherein it provides an extra product at a reduction to those that already use a number of of its different merchandise, to avoid wasting safety managers the necessity to discover extra suppliers. Typically Palo Alto goes the additional mile and buys an costly product, equivalent to Expanse for $670 million, and provides it without cost to clients simply to maintain them.
Cybersecurity is pushed, in fact, by mergers and acquisitions, however there’s a disadvantage: the variety of potential patrons is proscribed, definitely if it’s a firm value billions of {dollars} like CyberArk or Wiz. CyberArk has repeatedly mentioned that it isn’t on the market, till the precise provide comes alongside. “Alternatively, the funds that put money into cybersecurity are quietly dwelling with the prevailing mannequin,” says Junger. “Take a look at what occurred with the information safety firm market (DSPM), with corporations like Dig, Eureka, Polar, Stream – most of them had been ultimately acquired, even when for smaller quantities. Cybersecurity managers get up within the morning and ask what they’re lacking and that is how new industries are born on a regular basis. It is a dynamic that you do not see in different fields, like fintech, for instance, as a result of nature of the market, which is biased in direction of customers, reasonably than buying managers in massive enterprises.
Are valuations already too inflated?
Israeli cybersecurity proves again and again that it exists individually from the remainder of the tech trade, with a distinct financial logic, as a sort of state inside a state. Inside six months, two offers from the sector have climbed to first and second place on the record of the largest-ever Israeli exits.
The privately-held tech firm market – progress corporations and startups – proves this level. In accordance with IVC – LeumiTech, fundraising for cybersecurity corporations stands out above all others with a complete funding of $2.5 billion within the first half of 2025, in comparison with solely $1 billion in fintech corporations and $500 million for the rising area of defense-tech. Even the glamorous AI trade is unable to compete with cybersecurity and raised “solely” $1.5 billion within the first half of 2025. Though the restoration from the financing disaster of 2022-2023 impacts your entire tech trade, cybersecurity crashed much less and is rising a lot sooner. The common Collection A spherical funding for a corporation is $24.5 million in cybersecurity, in contrast with $12.8 million in insurtech and fintech, and $15.5 million in enterprise software program.
The big hole can also be mirrored within the inflated valuations of cybersecurity corporations. In accordance with information from Altshare, which has developed a platform that permits primarily non-public corporations, entrepreneurs and traders to handle their shares, the typical worth of funding in seed corporations within the cybersecurity sector elevated from $8 million on the finish of 2024 to $12.4 million within the second quarter of 2025 and is anticipated to achieve $13 million by the top of the 12 months. For extra mature corporations in Collection A funding, the valuation of corporations in new funding will improve from $50 million on the finish of 2023 to $80 million by the top of 2025. The earnings a number of can also be comparatively excessive all through all phases of the businesses, with a mean of 5.3 in contrast with 4 in fintech.
Altshare CEO Ronen Solomon explains that cybersecurity companiesw distribute extra choices as a relative proportion of the corporate’s complete shares – 15% greater than in different corporations, and that at cybersecurity corporations, the speed of corporations which have a secondary spherical (wherein entrepreneurs and staff promote shares on to traders) has doubled because the finish of 2023. “In cybersecurity, the group would not come for the wage, as a result of they know they’ll get upside in choices and secondary rounds,” says Solomon.
“You get a premium just by being Israeli” “The cybersecurity market is at present in its golden age for a wide range of causes: the proliferation of options from varied fields, the rise of AI that’s deterring many gamers, and in addition the rise in protection budgets amongst nations around the globe,” Adv. Man Lachmann, accomplice and co-head of the IL high-tech follow group at Pearl Cohen, tells Globes. “Inside this market, Israel has been thought of a world chief for a number of years and Israeli corporations are typically on the forefront of varied branches inside cybersecurity. They’re additionally much less delicate to the political dangers that different Israeli expertise corporations expertise and right here there’s a premium you obtain just by being Israeli. Nonetheless, this market is performed virtually individually from different markets with its personal strategic patrons, common serial entrepreneurs and some traders who perceive and are well-connected in it.”
The massive entrepreneurs put money into one another
In Israel, for instance, most investments in cybersecurity are concentrated within the fingers of a small variety of funds: Gili Raanan’s Cyberstarts – the fund behind successes equivalent to Wiz and Cyera, alongside Team8, Image Capital, Glilot Capital, Yoav Leitersdorf’s YL and Natan Shohami’s Hyperwise. Serial entrepreneurs, equivalent to Shlomo Kramer, Assaf Rapaport, Yevgeny Dibrov, Nir Zuk, Mickey Bodai and Amichai Shulman, put money into one another and create a extremely concentrated material within the trade. International enterprise capital giants equivalent to Sequoia, Greylock, Index and Perception have recognized the area of interest and are at present main a few of the seed rounds within the area, creating one other downside – Israeli entrepreneurs who would not have even one Israeli investor on the board of administrators, an issue that would result in dropping their approach within the early phases.
Lachmann says, “The celebration of exits in cybersecurity creates a sort of impact that pushes increasingly entrepreneurs into cybersecurity, which can create a better problem down the street. As a result of when a large like Palo Alto arrives and acquires a large like CyberArk, it signifies that the opposite corporations lively in the identical market (id administration) will obtain smaller acquisition provides, if any. As well as, this may occasionally result in degeneration in different expertise areas – each golden age reaches a sure saturation level.”
Printed by Globes, Israel enterprise information – en.globes.co.il – on August 3, 2025.
© Copyright of Globes Writer Itonut (1983) Ltd., 2025.
