Devo Technology CEO Marc van Zadelhoff forecasts a major shakeup in the security industry with a large transaction or merger among the top 20 security companies in 2023.

“Two of the top 20 security companies will merge,” van Zadelhoff told SDxCentral. “With prices down, I wouldn’t be surprised to see a large transaction or merger of equals as companies aim to consolidate share and take out costs while the market is at an inflection point.”

Security vendors are not immune to the economic downturn as several powerhouses reported disappointing guidance and outlook misses, and well-funded security startups underwent layoffs last year.

Van Zadelhoff expects 2023 will be the year when mergers and acquisitions (M&A) match to occur as buyers finally move on to startups with depleted financial resources.

“The reality is that some startups will run out of cash – even ones with really great tech. A dance is taking place between less financially successful startups with good tech and larger companies and investors with deep pockets who have been sitting on the sidelines waiting for the market to hit bottom before buying,” he wrote in response to questions.

In the past few years, security giants already started building up their platform approach and consolidating security capabilities and technologies through acquisitions. Most recent examples include Google's Mandiant acquisition last year to integrate the security company’s technologies and resources into its cloud platform, SentinelOne buying Attivo Networks for its detection and response (XDR) platform, and Palo Alto Networks nabbing Cider Security to strengthen its supply chain security and code–to-cloud cloud-native application protection platform (CNAPP).

M&A activities this year will be across all security categories, van Zadelhoff predicts. “We’re going to see more tuck-in acquisitions as companies look to acquire features they didn’t have the time or resources to build themselves.”

Forrester analysts’ cloud computing predictions for this year echoed van Zadelhoff’s forecast to see a major acquisition in the security industry. The analysis firm expects Amazon Web Services (AWS) to acquire a managed detection and response (MDR) vendor in 2023.

Devo eyes more acquisitions, IPO

The cloud-native logging and security analytics vendor announced two acquisitions last year. It bought autonomous threat-hunting startup Kognos and a SaaS cloud-native security orchestration, automation, and response (SOAR) LogicHub for Devo’s vision to deliver autonomous security operation centers (SOCs).

“We’re always on the prowl for more [acquisitions],” van Zadelhoff noted.

And the security unicorn also looks to file for an initial public offering (IPO) in the next one or two years, he added. “We’ve tripled revenue, customers, and employees in the past two years, and closed five new multimillion-dollar customers in just the past four months.”