‘Acquirers of businesses have changed their taste in what they’re looking for as things evolve. Strategic buyers who are really driving the consolidation, particularly in areas like cybersecurity, artificial intelligence and data analytics, are fueling this growth,’ says John Holland, managing director of Corporate Finance Associates.

The rise of AI solutions and evolving cybersecurity threats are giving way to a breeding ground of M&A activity for cybersecurity and data analytics firms, according to one M&A expert.

“Data analytics and cybersecurity is going to be a hot space for the foreseeable future,” John Holland, managing director of Corporate Finance Associates, told CRN. “Data analytics [firms], I think we’re just in the beginning of that. Data analytics, artificial intelligence, machine learning… I would expect a lot of activity in the next few years.”

In the cybersecurity space, the focus appears to be shifting towards strategic buyers who are seeking to enhance their cybersecurity offerings.

“Cybersecurity remains an incredibly vibrant sector,” he said. “It’s the strategic buyers who are really driving the consolidation.”

Laguna Hills, Calif.-based Corporate Finance Associates is an investment banking firm with decades of experience in executing mergers and acquisitions in the IT and telecom services industries.

Despite a decline in the number of deals compared with previous quarters, Holland said that the market remains strong with promising growth on the horizon driven by interest rate shifts and increased demand in specific areas like cybersecurity and data analytics.

The current volume of M&A activity in North America is still “robust,” even if it’s down from the peaks of 2021 and early 2022, he said. In fact, the number of deals are still higher than before the pandemic. According to Holland, there were 336 IT services M&A deals in 2018 and 383 deals 2019 which is an average of 96 deals per quarter. In Q3 2024, there were 110 deals alone.

“We’re seeing fewer deals than during the pandemic boom, but the market is still very healthy,” he said. “And with key factors like interest rates and emerging technologies in play, the M&A landscape is poised for continued growth. I’m very bullish for 2025 as I think interest rates are going to be reduced. That’s fuel for M&A activity which will ignite more deals across sectors like MSPs, data analytics and cybersecurity. Companies are focusing on acquiring AI and machine learning expertise and cybersecurity will remain a top priority given the growing threats posed by AI-driven attacks.”

AI is such a hot space right now that he said companies from industries like oil field services are acquiring data analytics firms to stay competitive.

“This is likely a trend we’ll see continue, as businesses across sectors recognize the importance of AI in their operations,” he said.

And while interest rates continue to play a key role in shaping the M&A landscape, recent reductions in both the U.S. and Canadian markets have sparked optimism for future growth which Holland believes will make 2025 a significant year for M&A.

“Acquirers of businesses have changed their taste in what they’re looking for as things evolve,” he said. “Strategic buyers who are really driving the consolidation, particularly in areas like cybersecurity, artificial intelligence and data analytics, are fueling this growth.”