by Brenon Daly
Having gotten a little richer in its mid-March IPO, Zscaler is now looking to get a little smarter with some M&A. In its first-ever acquisition, the cloud security vendor has reached for TrustPath, a startup that Zscaler plans to use to help speed and sharpen its analysis of the billions of transactions that flow over its platform each day. Not much is known about TrustPath, which is still operating in stealth mode.
Zscaler’s inaugural print continues the trend of information security (infosec) providers emerging as some of the busiest buyers of machine learning (ML) startups, a market that itself is pretty busy. In fact, for the past two years, tech investment bankers we have surveyed have forecast ML to be the single biggest driver for M&A in each of the coming years, ahead of other notable themes such as the Internet of Things and cloud computing.
More importantly, that sentiment is coming through in the actual deal flow. According to 451 Research’s M&A KnowledgeBase, the number of overall ML transactions is on pace to top 120 deals in 2018, three times the number announced just in 2015. Infosec is playing a key role in the record number of ML transactions, with Zscaler joining Amazon Web Services, Splunk and even PayPal in the parade of recent security-focused ML acquirers.
Collectively, infosec buyers are punching well above their weight in the emerging field of ML M&A. Look at it this way: Infosec accounts for roughly 15% of total ML deals in the M&A KnowledgeBase, despite security acquisitions making up less than 5% of all tech transactions we record in any given year.
The main reason for infosec’s outsized role in the ML market is that there’s actually business to be done there. In fact, in a recent survey by 451 Research’s Voice of the Enterprise: AI & Machine Learning, Adoption, Drivers and Stakeholders 2018, infosec emerged as the second-highest rated use case for ML, trailing only ‘business analytics.’ Importantly, the rankings in our survey came from folks who actually have ML technology up and running or are nearly there. With that kind of demand from customers, it’s no wonder infosec suppliers are leading the charge in snapping up smarts.
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Autonomous vehicle (AV) targets are in the driver’s seat again, this time with Ford Motor’s majority acquisition of software firm Argo AI through a five-year, $1bn investment. The finish line for Ford is 2021, when it aims to roll out a fully autonomous vehicle. To get there, Ford plans to combine its existing self-driving tech with Argo’s artificial intelligence (AI) and robotics software.
Before 2016, Ford had only made one tech purchase in the previous decade, for software to connect smartphones with in-car entertainment. Then last year – a year when tech vendors including Google and Uber were already testing self-driving cars on the roads of Pittsburgh and elsewhere – Ford awoke, buying computer vision and machine-learning software firm SAIPS. That deal followed similar moves by its peers in 2016, as Toyota nabbed Jaybridge Robotics and General Motors paid $581m for self-driving navigation systems provider Cruise Automation.
Auto manufacturers are far from the only companies – or even the only non-tech companies – inking transactions in this space. We are also seeing activity from automotive parts suppliers like Continental AG and Delphi, both of which made an AV acquisition in the past two years, as well as tech vendors such as Google, Uber, Intel, HARMAN and TomTom, the last of which purchased a company in the sector called Autonomos just last month. According to 451 Research’s M&A KnowledgeBase, there have been 20 acquisitions of AV tech since the start of last year, compared with just six in the four years before that.
We highlight AI and machine learning in our 2017 Tech M&A Outlook for application software, as we predict that companies will buy technology and expertise in this area. Subscribers to 451 Research’s Market Insight Service can also access our report on M&A trends and predictions in AI and machine learning.
For more real-time information on tech M&A, follow us on Twitter @451TechMnA.