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NortonLifeLock (NLOK) Boosts Cyber Safety Portfolio on Avast Buyout

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The United States-based NortonLifeLock NLOK and London-listed rival, Avast Plc, finally reached a merger agreement on Tuesday, under which the former will acquire the latter in a cash-and-stock deal. The merger agreement values Avast’s entire ordinary share capital between $8.1 billion and $8.6 billion, depending upon its shareholders’ elections.

Notably, NortonLifeLock confirmed last month that it is in advanced talks over a merger with the U.K.-based cybersecurity firm Avast. The company also stated that it has to either roll out a firm announcement to make an offer for Avast or that it does not intend to make an offer by 5 p.m. London time on Aug 11.

Why Avast Buyout Makes Sense for NortonLifeLock?

The merger will combine two broad and complementary product portfolios, thereby helping NortonLifeLock in becoming a global leader in the consumer security software market. Avast primarily makes free and premium security software for desktop and mobile devices, while NortonLifeLock primarily deals with consumer cyber safety.

NortonLifeLock Inc. Price and Consensus

NortonLifeLock Inc. Price and Consensus
NortonLifeLock Inc. Price and Consensus

NortonLifeLock Inc. price-consensus-chart | NortonLifeLock Inc. Quote

The acquisition of Avast will help NortonLifeLock enhance its product portfolio and customer base. The U.S.-cybersecurity firm believes the combination will untie their complementary product portfolio strength for more than 500 million users.

The merger will strengthen geographical diversification and will likely help NortonLifeLock expand its presence in the Small Offices/Home Offices (“SOHO”) cyber security and VSB markets.

NortonLifeLock believes the combination would be accretive to its top- and bottom-line growth. It projects that the acquisition will drive double-digit growth in EPS within the first full year following the completion of transaction and double-digit growth in revenues over the long run.

The acquisition is also anticipated to strengthen the financial profile of the combined entity, through cost synergies, increased scale, long-term growth and strong flow generation. NortonLifeLock estimates the merger will create approximately $280 million of annual cost synergies.

Solid Cybersecurity Demand Driving Growth

NortonLifeLock is witnessing solid adoption of its cybersecurity and information backup solutions owing to the surge in hacking events and data breaches, globally.

Per the IDC’s report, worldwide security spending is expected to reach $174.7 billion in 2024, reflecting a compound annual growth rate of 8.1% from 2020-2024. NortonLifeLock is poised to benefit from an increase in security spending by enterprises.

Additionally, the company launched solutions such as Norton 360 for Gamers, which promotes cybersecurity in the gaming space and Norton 360 with LifeLock for family, an all-in-one protection plan to help protect the whole family’s identities, devices and online privacy. It has also expanded its privacy offering by introducing Privacy Monitor Assistant, which helps customers reclaim control over their personal information.

The new capabilities are likely to drive innovation in the company’s product portfolio, as well as bolster user acquisition and engagement on its platform, thereby aiding the top line.

Zacks Rank & Stocks to Consider

NortonLifeLock currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Microsoft MSFT, Cadence Design Systems CDNS and Texas Instruments TXN, all carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Microsoft, Cadence Design and Texas Instruments is currently pegged at 11.5%, 11.7% and 9.3%, respectively.

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Texas Instruments Incorporated (TXN) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

Cadence Design Systems, Inc. (CDNS) : Free Stock Analysis Report

NortonLifeLock Inc. (NLOK) : Free Stock Analysis Report

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