Cybersecurity is no longer just a priority. It is a global arms race. As threats become more complex and costly, major tech companies are responding with acquisitions, not internal development. The result is a sharp uptick in buyouts of small-cap cybersecurity firms that offer niche solutions in areas like AI threat detection, cloud defense, and ransomware response.
This is not theory. It is happening right now.
In 2024, cybersecurity M&A activity hit $68 billion, up 22 percent year-over-year, according to PitchBook. With global cybersecurity spending projected to reach $225 billion in 2025, that number is likely to grow. Big players are moving early, locking in innovation before it becomes too expensive.
The Deals Are Already Moving
The buying spree is well underway. Recent examples include:
- Palo Alto Networks acquiring Dig Security for $400 million
- Microsoft purchasing RiskIQ for $500 million
- SentinelOne acquiring PingSafe for $250 million
Each deal targets a company with a focused strength — cloud protection, threat intelligence, or attack surface management. These are not defensive buys. They are growth strategies aimed at plugging capability gaps.
Small-Cap Names to Watch
The next wave of acquisitions will likely involve public small-cap firms with established customer bases and specialized tools.
- Rapid7 has hinted at interest from buyers following a tough fourth quarter in 2024
- Tenable, a leader in exposure management, offers scalable solutions and strong enterprise traction
- Varonis Systems specializes in insider threat prevention, a growing focus as companies face tighter regulatory scrutiny
These companies are not speculative. They are operational, revenue-generating firms that solve very specific problems for enterprise customers.
Why These Firms Are in Demand
Cyberattacks are becoming more intelligent, automated, and damaging. Ransomware payments topped $1.1 billion last year, according to Chainalysis. AI-generated phishing attacks are now outpacing traditional detection systems. Zero-day vulnerabilities are appearing faster than they can be patched.
Companies know they are underprepared. The cybersecurity workforce remains under pressure, and most firms do not have the resources to build advanced defenses in-house. The solution is acquisition.
Startups with AI-native architectures, automated response tools, and compliance-ready platforms are no longer niche. They are becoming essential.
Private Equity Is Fueling the Trend
It is not just Big Tech doing the buying. Private equity firms are stepping in aggressively, bringing new capital and longer-term strategies to cybersecurity rollups.
Thoma Bravo spent $2.3 billion to acquire ForgeRock in a deal that is already being watched as a model. Their strategy is to streamline, scale, and eventually sell at a premium. Other firms are following the same playbook.
The logic is simple. The cybersecurity market is growing fast, and the barriers to entry are high. Buying proven firms at a discount today could produce major returns within two to five years.