Mergers & Acquisitions: The Frenzy of AI and Cybersecurity
Mergers and acquisitions have become the name of the game as strategics look to bolster their IP and technical capabilities. In the first half of 2025 alone, AI deal volume surged 35%, hitting 262 transactions, with a median deal size of $67.5M and an average north of $435M.
But the story isn’t just in the numbers. The underlying signal is clear: the corporations that want to stay relevant in this cycle of extreme technological change are choosing acquisition over internal builds. Why? Because the innovation cycle in AI and cybersecurity is moving faster than most enterprises can manage. Buying best-in-class startups is often more efficient than trying to replicate their work internally.
OT Cybersecurity in the Spotlight
One of the most telling moves came when Nozomi Networks, an OT cybersecurity player and an adjacent competitor to our portfolio company Iolite Secure, was acquired by Mitsubishi Electric for $1B. This follows in the footsteps of Armis, another OT cyber company, which cleared a similar valuation at 10–15x revenue.
These deals underline two critical realities:
Cybersecurity is non-negotiable in a world where infrastructure and supply chains are increasingly digital.
OT security specifically is heating up—a space long underserved by traditional IT-focused security vendors, now attracting billion-dollar strategic exits.
AI: From Models to Solutions
Interestingly, the startups commanding the most interest in AI aren’t the ones with the “biggest models” or the flashiest chatbots. Instead, deal flow is consolidating around companies that solve persistent, expensive problems and do so in ways that integrate cleanly into existing enterprise workflows.
Think of this as a return to fundamentals: less about hype, more about ROI, integration, and efficiency. Strategics are hunting for solutions that slot into their infrastructure and provide immediate leverage.
Market Dynamics and Valuations
If you look at the broader picture, the parallels to the late ’90s are hard to ignore. That period was marked by a wave of VC and M&A activity during the internet revolution—corporations racing to grab land in a rapidly expanding new domain.
Today we’re witnessing a similar frenzy. Since 2021, over 400 cybersecurity M&A deals have been completed each year. Since January 2024, cybersecurity acquisitions have been valued at an average of 8.1x revenue, putting a premium on companies with strong recurring revenue and sticky customer bases.
Why This Matters for Builders and Investors
At Highway Ventures, we don’t view this as bubble territory—we see it as the natural cadence of market consolidation during a period of extreme technological change. Strategics are under pressure to deliver AI capability and resilient cybersecurity to their customers now, not in three years. That urgency makes well-positioned startups highly attractive acquisition targets.
For builders, this is a reminder: it’s not about chasing the biggest model or the loudest hype cycle. It’s about solving real, expensive, persistent problems—and designing with integration in mind. For investors, it’s a signal that M&A remains a dominant exit strategy, with corporates ready to pay premiums for capabilities that align with their roadmap.
Closing Thoughts
The AI and cybersecurity M&A boom is not slowing down—it’s accelerating. Deal velocity, valuations, and strategic interest are all pointing upward. Just like the internet era, there will be winners and losers, but those who focus on delivering practical, integrated solutions are commanding attention and premium multiples.
We’re watching this consolidation carefully. Not because we fear a crash, but because this is the kind of market where disciplined venture studios and investors can create asymmetric outcomes. It’s a land grab, and the prize is enduring relevance in the age of AI and cyber.
