Swedish-based cybersecurity and licensing firm Cognosec has vowed to make at least 11 acquisitions this year, with Europe and Latin America as a key target for expansion.
Cognosec swooped on the UK this week, acquiring UK security distributor A-tek. The firm sells cybersecurity SaaS solutions from AVG and F-Secure through its own online portal.
Last year was a busy one for Cognosec. The firm became a public company - floating on the Nasdaq First North exchange - on 22 September 2016, and established four new subsidiaries in the United Arab Emirates, Germany, Sweden and the UK during that same year.
Chairman of the board at Cognosec Kobus Paulsen told Channelnomics Europe that the A-tek acquisition is the first and smallest of a planned 11 acquisitions to be made by the firm in 2017.
"We are an acquisition platform, and at the moment the short-term acquisition progress is in fact 11 companies, out of a total shortlist that expands more than 30 companies. The rationale here is that we don't buy anything that is disruptive. We are not going to try and merge two companies; we are looking for things that strategically fit, that are adding products, adding people or adding geographies. So it is a mixture of either one of those. I think in the next few weeks you will see another announcement coming up," he said.
"When you buy these companies it is different from investing in these companies. When you invest there is a certain due diligence that you have to perform, whereas when you buy these companies there is a very different attitude, because all of the people and everything comes with the company. For that reason we are able to jump through financial, and legal and technology due diligence very quickly. We have a process that goes, from start to finish, if everything is OK and their accounts are up to date, we can do a complete cycle in eight weeks."
He added: "We are geared up and focused to get this 11 done as quickly as we can and we can probably handle two or three at a time. I am confident that we will get those 11 sorted this year."
Paulsen said that future acquisitions will all involve entirely cloud-based and as-a-service companies. He said that while "the majority" of the 11 acquisitions will be made outside Europe, naming South America as a market with "a huge opportunity", Europe will nevertheless be a key target.
"First of all we won't buy anything that is not profitable. They have to be able to break even, and be able to be scalable in that sense. We are not investing or buying something where their business model or product needs further investment. We are starting with some small ones; A-tek was a very small one and probably the smallest one out of all of them," he said.
"We are not buying stuff that would be disruptive to us… [we don't want] to think about where people will fit in and deal with all of that organisational discomfort. So for us the target size for companies is up to €5m and thereabouts."
Paulsen said that Cognosec's business breaks down into two areas. Roughly 80 per cent of the firm's business is generated through selling security products and licences, with the other 20 percent coming through professional and advisory services, such as consultancy and managed services.
He said that the A-tek acquisition will add to Cognosec's product business, which will fall under its Dubai-based software-distribution arm called Credence.
"In the product side is repeat business, you buy a licence for a particular product for every 12, 24 or 36 months; that is certainly key to every part of our business. The acquisition comes into the product side of our business which is called Credence."
"Traditionally all of our clients and portfolios [are] large banks and large organisations. In Africa the majority of the top ten banks have us as a cybersecurity client, so we have a big focus on the banking sector; very large enterprises where you sell the product and licences to 10, 20, 30 thousand users. A-tek is important, and the expansion for that in Europe is important. We do see from our existing experience [in] Europe that the mid-market is not being addressed."
Paulsen describes Cognosec as somewhere between a distributor and a reseller. While the firm distributes licences and software though online portals, it is also a Platinum partner with Intel Security, and works with other security vendors such as Kaspersky, Symantec and Access Data.
"In the distributor and reseller model we would be classified as a distributor. Do we mix ourselves as a distributor and a reseller? It depends on how the customer comes into us. Of course, in the digital portal you are selling directly into the end consumer and at that point you are effectively a reseller. Typically for a deal, Intel would come to us and say we have been approached by such and such company and put us in for lead generation from that point of view, so it works both ways and for that reason we created that separation of the business whether it is as an advisory or a product, distribution or reselling."
The chairman said that Cognosec's cross-over into different strains of the channel can cause problems, as the firm even competes with its prime partner Intel Security on a number of occasions.
"It is sensitive. Do we step on people's toes? Yes, we do and I think Intel is a prime example. With them we feel comfortable in the Middle East and comfortable in Africa. In Africa we even compete with Intel Professional Services, but they are comfortable with it and we are comfortable with it provided we know how to hunt and what the rules are around that," he said.
"Now Intel [is] pushing us into [the rest of] Europe, where we have not been before and where there are plenty of Intel players, you can imagine how that is going. But I think it is going well because we have proved to Intel in the regions where we are their partners that we are the prime partner. We provide more than 30 per cent of all of Intel's business in South Africa, that relationship you take seriously, and to be able to do that and replicate that in other regions is exactly what we do."Based in Stockholm, Cognosec falls under the parent company UC Group; a UK conglomerate comprising its own investment arm UC Capital and other companies such as Cognosec, Secure Trading and Secure Trading Financial Services.
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