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September 7, 2021updated 09 Sep 2021 1:40pm

F-Secure considers public listing of consumer security spin-off

By Robert Scammell

Finnish cybersecurity company F-Secure is assessing the viability of creating a consumer security spin-off and listing it on the Nasdaq Helsinki Stock Exchange.

The Helsinki-headquartered company is considering the restructure to capitalise on the faster growth of its enterprise business while dedicating suitable resources to its consumer segment.

The full details of the proposed spin-off have not yet been established, but it plans to complete a review by the end of June 2022.

The restructuring would see the creation of “two distinctive brands” for business-to-business and business-to-consumer security solutions.

The decision to carry out a review into the consumer spin-off was made by F-Secure’s board of directors. In a UK exclusive interview, F-Secure CEO Juhani Hintikka told Verdict that he personally supported the plan.

He said the company was evaluating its strategic options prior to him taking the reins in October 2020, but F-Secure has since “taken some more concrete steps forward”.

The company currently has three business segments: corporate security products, cybersecurity consulting and consumer security. The consumer business would likely keep the F-Secure branding, while the corporate security and consulting business would take on a new brand.

Hintikka said that part of the rationale for the spin-out was that the B2B and B2C divisions use “different playbooks” that are customer dependant.

“The way we would like to be organised across the market is from a customer perspective,” he said.

F-Secure primarily reaches consumers via channel “partners and operators, communication service providers”. It reaches businesses through partners to midmarket companies and “enterprises directly”.

In an investor presentation shown during its Capital Markets Day event, F-Secure outlined the benefits of creating two separate companies.

Between 2015 and 2020, F-Secure’s revenue from consumer security has remained flat, while corporate security has grown by 130% at a compound annual growth rate of 18.2%.

“We want to grow all of our businesses,” explained Hintikka. “But at the same time, we see that on the B2B side the market is growing faster than on the consumer side, which makes it natural for us to make sure that we capture that growth and are able to invest while also taking good care of the consumer business, which is really strong for us.”

He added that listing the consumer business on the Nasdaq Helsinki Ltd Stock Exchange is one way to raise funds.

It would also ensure F-Secure has “adequate financial resources” for all of its businesses to be successful, Hintikka said.

The consumer side would likely focus on selling software, such as antivirus and endpoint protection, available in an “all-in-one” software suite.

There would be some overlap of this software with the corporate business, but with a greater focus on areas such as incident detection and response.

Hintikka said F-Secure is responding to a “market need” for enterprises looking for a “one-stop-shop” where they can pay a recurring fee for services, including technology and people.

F-Secure sees cybersecurity consulting as its biggest market in absolute terms, but it estimates higher growth potential in corporate security products.

Hintikka attributes this to the sales cycle being shorter compared to a “service orientated, outcome-based project”.

Cybersecurity market consolidation

If F-Secure proceeds with its spin-off plans, it will become the latest cybersecurity company to separate its enterprise and consumer businesses.

Security software provider McAfee announced in March that it is selling its enterprise arm for $4bn to focus on the consumer market.

In 2019, US cybersecurity firm Symantec sold its enterprise security assets to Broadcom for $10.7bn to focus on consumer protection, creating NortonLifeLock.

That business then merged with British rival Avast to form a global consumer security powerhouse in August this year.

According to GlobalData’s deals database, there were 366 cybersecurity acquisitions globally in 2020, with a total deal value of $55.7bn.

F-Secure has not been influenced by this consolidation “directly”, said Hintikka, because he believes there are different ways of approaching the consumer market.

Hintikka didn’t rule out the possibility of the F-Secure consumer spin-off acquiring or merging with another consumer security business. However, he views an initial public offering as an “interesting option”.

He added that there is a unique opportunity in the market right now thanks to the increase in remote working and continuing investment in protecting digital infrastructure.

“If you look at the overall information security market, we read about incidents happening almost every day around the world,” said Hintikka. “So the market is in growth mode overall and people are paying attention, companies are paying attention.

“Every time there’s a highly publicised incident, we usually get phone calls.”