Avast worth US$10bn to suitor Norton, reckons Berenberg


Avast PLC (LON:AVST) should not settle for a value of less than US$10bn (GBP7.25bn) in merger talks with US peer NortonLife Lock, according to Berenberg.

The UK cybersecurity software group confirmed discussions were underway this morning, but the US$8bn price being suggested in the press looks well short of the mark, according to the broker.

Avast’s two founders own around 35% of the company and the total insider ownership is around 37%, Berenberg notes.

Avast confirms merger talks with NortonLifeLock

“Given that our price target for the stock is GBp680 (equity value of US$9.7bn), our view is that nothing short of a USD10bn valuation is fair to Avast’s shareholders,” it said, adding that would value it in line with McAfee.

Cybersecurity valuations are being propelled higher by the spate of cyberattacks and with private equity and large enterprises attempting to outbid each other, deal premiums have gone up as well.

“Thomas Bravo’s acquisition of ProofPoint in April 2021 had a 34% deal premium, so the 11% implied deal premium for Avast, a company which pioneered one of the cheapest and most successful customer acquisition models, seems far too low in our view.”

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Norton will also get substantial synergies from any deal even before any organic growth.

“A number of private equity funds are active in the cybersecurity space (Thomas Bravo, Insight Partners, Bain Capital, Crosspoint Capital Partners, Vitruvian Partners), so a counter-bid from any of them, or a combination of them, is not out of the question”, adds Berenberg.

Avast shares rose 17% to 590.4p, giving it a value of GBP6bn (US$8.4bn).

Norton is required to make a firm offer no later than 5:00pm on 11 August 2021.


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