Nordic firms ride wave of cyber M&A activity

HELSINKI — Nordic defense firms are buying each other up as they vie for a greater share of potential contracts that could come with increased cybersecurity funding among the region’s armed forces.

The mergers and acquisitions are taking place as Sweden seeks NATO membership, and neighboring Finland this year joined the alliance.

Combined, according to defense spending plans, the Nordic states of Denmark, Finland, Iceland, Norway and Sweden are to invest more than $2 billion to upgrade their respective military and national security cyber defenses over the next three years.

Meanwhile, cybersecurity companies are also forming strategic partnerships with the regional armed forces. For example, the Norwegian firm Atea won a two-year information technology and cybersecurity services contract worth $45 million from the Norwegian Defence Research Establishment (FFI) and the Norwegian National Security Authority (NSM).

The former is responsible for Norway’s defense research and development efforts, and the latter serves as the country’s national intelligence agency. FFI also operates as a procurement agency for the property-focused Norwegian Defence Estates Agency, the Norwegian Armed Forces and the NSM.

Atea signed the first segment of the two-part deal, with a two-year option, in June 2022. The second part of the deal was inked in April 2023. The contract covers the delivery of hardware, software, IT and network cyber defense solutions, and consultancy services.

“The deal reflects the greater emphasis on IT network and infrastructure security in national defense areas. The contract reinforces our positive and developing relationship with the defense sector,” said Steinar Sønsteby, CEO of Atea.

The appetite for strategic corporate partners in the Nordic cybersecurity domain gained momentum in 2022 following a far-reaching nonequity collaborative agreement between Finnish software specialist Digia and Danish cybersecurity technologies provider Arbit Cyber Defence Systems.

The collaboration was instrumental in securing a $6 million contract to build a protected information-exchange gateway for the Finnish Defence Forces, said Jussi Tammelin, the director of Digia’s defense unit.

The contract includes the supply of a secure information-exchange gateway communication solution, as well as software and equipment. The technology is based on Digia’s Linja software and Arbit’s data diode.

“Our collaboration with Arbit reinforces the capabilities of our defense and security sector services in the Nordic countries. International cooperation improves the competitiveness of both companies when it comes to defense sector tenders and increases defense sector exports,” Tammelin told Defense News.

In 2022, Digia accelerated its plan to establish a dedicated defense unit, after it became clear Sweden and Finland intended to apply for NATO membership.

Nordic countries must do more to strengthen their cybersecurity against increasing threats, said Natasha Friis Saxberg, the CEO of Danish ICT Industry Association, a trade organization representing information and communication technology firms.

According to Saxberg, the pooling of Nordic skill sets in this area, driven by the wave of cybersecurity mergers and acquisitions, is beneficial to developing a deeper pan-Nordic expertise to counter cyberthreats.

“A significant number of the cyberattacks emanating from Russia and linked to the invasion of Ukraine are directed at Denmark and the other Nordic countries. Today, cyberthreats play a significant role in every war and conflict, and therefore it is necessary to invest in cybersecurity and make it a central element of our defense,” Saxberg told Defense News

Growth trends

Acquisitions — such as Swedish firm Lyvia’s takeover of Polish company IT Systems and Solution — underline a trend where major players in the Nordic cybersecurity space with the financial means are looking to use such purchases to consolidate the market and accelerate regional growth. That acquisition by Lyvia is expected to help the company gain greater access to even larger contracts in the defense and national security sphere.

The purchase also improves Lyvia’s reach in to the Baltic region as well as Central and Eastern Europe, according to Oleksandr Fomenko, who leads the business’s Central and Eastern European division.

“We want to expand in this high-growth sector. ITSS is a large player in a fast-growing industry with top-drawer, end-to-end cybersecurity services and impressive IT infrastructure modernization resources,” Fomenko told Defense News.

Similarly, Norwegian cybersecurity company DNV’s $107 million purchase of Finnish firm Nixu was motivated by a desire to win more contracts, while taking advantage of increasing investments by Nordic governments to upgrade and maintain next-generation cyber defenses and more reliable IT infrastructure.

DNV’s cybersecurity expertise has historically focused on high-security areas in energy, maritime, telecommunications and financial services. “By joining forces with Nixu, we will make cyberspace a more secure place with greater impact than either company could achieve alone,” said Remi Eriksen, DNV’s chief executive.

Other industrial acquisitions in the region included Sweden’s Truesec buying Danish firm Venzo Cyber Security. And Ireland-based Integrity360 acquired Sweden’s Netsecure. In Denmark, Columbus purchased ICY Security, while in neighboring Norway, Netsecurity acquired Data Equipment to create a new cybersecurity group with revenues of $74 million.

The acquisition of Venzo will allow Truesec to strengthen its cybersecurity offerings to both the corporate and national defense sectors in Denmark and the wider Nordic region, said Anna Averud, Truesec’s chief executive.

“The acquisition significantly enhances our cyber defense capabilities. It expands our capability to better defend cyberattacks. The pooling of our cyberspecialists with Venzo will make a significant difference in creating a safer society for all organizations in Denmark and Northern Europe,” Averud told Defense News.

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• Source: https://www.defensenews.com/industry/2023/07/04/nordic-firms-ride-wave-of-cyber-ma-activity/