← Back to Library

Not all cyber acquisitions are created equal: What to look for to make sense of the M&A noise

Ross Haleliuk · Venture in Security · ·13 min read
Commentary by Hex Index staff

Ross Haleliuk cuts through the hype of cybersecurity mergers and acquisitions with a sobering reality check: the headline numbers are often fiction, and the definition of "success" is a moving target that rarely satisfies everyone involved. While social media amplifies stories of $500 million exits, Haleliuk argues that the median transaction is far smaller and frequently leaves employees and later-stage investors with nothing but paper equity. This piece is essential listening for anyone trying to distinguish between genuine market consolidation and the creative accounting that dominates the industry narrative.

The Illusion of Universal Success

Haleliuk begins by dismantling the assumption that an acquisition is a victory for all parties. He writes, "Success in the broadest terms is making everyone happy, but whether or not an acquisition was successful is always a matter of whom you ask." This framing is crucial because it exposes the fundamental misalignment of interests in these deals. To a CISO, success means a seamless product integration; to a founder, it means retaining mission control and cashing out; to a venture capitalist, it is purely about the return multiple.

Not all cyber acquisitions are created equal: What to look for to make sense of the M&A noise

The author illustrates this friction with a stark example of valuation disparity: "Someone who has joined the company as one of the first 10 team members could be making a life-changing amount of money, while someone else, who joined as the team member number 150, may just get enough to pay for a week-long vacation, or a cup of coffee, depending on how lucky they get." This observation highlights the brutal lottery of vesting schedules that often goes unmentioned in press releases. Critics might argue that early employees inherently take more risk and thus deserve the windfall, but Haleliuk's point is that the perception of a successful exit is often shattered for the majority of the workforce, regardless of the headline price.

"The vast majority, not so much. Oftentimes, nobody makes money. Sometimes founders & early-stage VCs make something while employees and later-stage VCs make nothing."

Decoding the Acquisition Hierarchy

Moving beyond the abstract, Haleliuk proposes a practical hierarchy for evaluating deal quality, starting with the "gold standard": acquisition by a large, established public company. He notes that the best outcomes involve "all-cash or cash-and-stock transactions, with no crazy vest periods and other clauses." However, he warns readers to look past the press release. As Haleliuk puts it, "terms of transaction are not disclosed is a shorthand for 'terms of transaction are not so great that we want to talk about them'."

The author suggests a clever, if cynical, heuristic for gauging the true nature of a deal: analyze the post-acquisition behavior of the acquired team. If the founders and a few engineers stay while the rest of the staff announces they are "taking time off to recharge," it is likely an "acqui-hire" rather than a true business acquisition. This distinction matters because it signals whether the acquiring firm values the product or merely the talent. Haleliuk writes, "If the acquiring company is keeping the entire team (or most of the team), chances are they see the acquisition as buying the business, but if a big chunk of the team is suddenly announcing how excited they are to 'take time off and recharge before the next opportunity'... then it's often an acquisition to just integrate the product."

When discussing private company acquisitions, the risks shift toward liquidity. Haleliuk points out that "private companies don't tend to do all-cash acquisitions," leaving founders and employees holding stock in a company that may not be publicly traded for years. This echoes the complexities seen in historical "earnout" structures, where the final payout is contingent on future performance metrics that the acquired team no longer controls. The uncertainty is palpable: "Over the past years, most of the private company IPOs haven't been fantastic, so there's always a question of what the stock will be worth when an exit does happen."

The Distortion of Market Data

Perhaps the most damaging insight in the piece is the revelation regarding how acquisition prices are reported. Haleliuk asserts that "media may inflate M&A transaction prices by as much as 3X-4X," turning a $25 million deal into a reported $100 million headline. This inflation creates a distorted market perception where startups believe they are worth significantly more than the reality of the transaction.

He contrasts these inflated figures with the rare, high-value deals, such as Palo Alto Networks' acquisition of Koi for approximately $400 million. While these outliers make the news, Haleliuk reminds us that "the median acquisition price of a cyber startup is much lower than these top numbers (somewhere between under $100M and $200M if I were to guess)." This gap between the "noise" on social media and the "median" reality is where many founders make fatal strategic errors.

"Simply put, not everything is what it seems. When an established, reputable company is issuing a press release stating the acquisition amount, these numbers are typically pretty credible... Things get pretty hairy when we look at media reports."

Haleliuk also touches on a newer trend: acquisitions within the same venture capital portfolio, citing Cyberstarts' strategy of having their winners buy their portfolio peers. While this keeps capital within the fund, it raises questions about whether these are true market valuations or internal accounting maneuvers to manage a fund's net asset value. A counterargument worth considering is that in a frozen IPO market, these internal deals provide a necessary liquidity event that would otherwise be impossible, even if the price isn't market-competitive.

Bottom Line

Ross Haleliuk's most compelling contribution is his refusal to accept the standard narrative of M&A success, forcing readers to confront the reality that for every "generational company" exit, there are dozens of deals where the majority of stakeholders lose out. The piece's greatest vulnerability is its reliance on anecdotal heuristics rather than hard data, given the author's admission that exact median numbers are elusive. However, the framework provided for reading between the lines of press releases and LinkedIn updates offers a vital survival guide for navigating a market saturated with noise and inflated expectations.

"The number of different scenarios is so vast that it is extremely, extremely rare to ask all the different people 'Is the X acquisition successful?' and have all of them say 'Yes'."

Sources

Not all cyber acquisitions are created equal: What to look for to make sense of the M&A noise

by Ross Haleliuk · Venture in Security · Read full article

There is a lot of noise about cybersecurity startup acquisitions. It surely seems like everyone is getting acquired for at least $500M every month, and social media has been amplifying that big time. Companies seemingly get acquired for hundreds of millions before even coming out of stealth. Some of it is real, some of it is kind of real, and some of it is very creative ways to stretch reality; ways that aren’t exactly untrue, but that cannot be taken at face value.

This piece has been sitting in draft for many months, but it’s been pretty hard to write. It’s also a piece that may be painful to read for many folks who are personally familiar with how these things play out, or who have found themselves in one of the less-ideal scenarios I am going to describe. Suffice to say that startups are hard, that most founders and teams are doing the impossible work to make them successful, and that success is hard to intentionally architect because of the millions of factors that come into play.

Lastly, none of what I am talking about here is meant to be about any specific company (unless I use a company as an example, and I will do that sparingly and as gently as possible).

This issue is brought to you by... Maze.

Code security you trust.

Legacy SCA and SAST scanners match patterns and bury engineers in noise. That’s why we built Maze Code: AI agents that understand your code and dependencies.

AI agents investigate every finding with context from your code and cloud, close false positives, and catch business logic flaws other tools miss. Then they help you fix what’s left, right in your IDE or coding agent.

Finally, inbox zero for your code and cloud vulnerabilities is possible.

First things first: defining success of a startup exit.

How do you define the success of a startup exit? Well, that depends on whom you ask, and rarely will all the people agree:

To CISOs and security teams, an acquisition is successful if it makes the product they are using better, embeds it seamlessly into their existing stack, and makes it much easier to realize the compound value of the broader security tools portfolio.

To founders, an acquisition is successful when the acquiring company allows them to continue executing on their mission with more resources and support than before, and ...