Next-Gen Firewalls, Brooks Rebrands & Digital Health M&A

Last week our research team hosted a webinar highlighting the latest M&A boom across robotics, healthcare tech, and AI. Tune into the recording here. We also released a full M&A report digging into those key trends, including venture funding, a record birth of unicorns, big IPOs, and the most important acquisitions. Download the full report below.

Please enjoy these insights from our research team.

THNQ: Strong Momentum with Next-Gen Firewall at Palo Alto Networks

Palo Alto Networks, a THNQ index member, held an investor day and revised its long-term targets that exceeded analyst expectations. With shares up nearly 30% in the past 3 months, Palo Alto Networks is experiencing strong momentum in their next-generation firewall solutions as they are expecting revenue growth in the range of mid-20s and ARR growth of 40%+ through FY’24. What is driving this demand for their solution is that cloud adoption and data center growth has been unstoppable while security incidents are becoming more sophisticated and malicious.

Palo Alto has also evolved beyond next-generation firewalls to become a comprehensive cybersecurity provider, with solutions across the traditional perimeter to hybrid/cloud security incorporating artificial intelligence capabilities. Its Cortex solution is an AI-powered cloud-based platform that was built to prevent and solve security issues using behavior analytics. Management indicated at the investor day that ~11K alerts/day sometimes takes four days to investigate and that a third of the alerts are ignored. As the news of data breaches ripples throughout the industry on a weekly basis, solutions from Palo Alto allow full transparency using advanced AI/ML to detect and respond to attacks using end-to-end workflow automation.

Gartner estimates public cloud spend growing to ~$300B in FY’24 up from $125B in FY’21, growing 25% Y/Y. Palo Alto is looking to capture the cloud security market which represents ~6-7% of total public cloud spend with its best-in-class cybersecurity solutions.

ROBO: Brooks Rebrands as Azenta Life Sciences

After officially divesting their semiconductor equipment segment last week to Thomas H. Lee Partners for $3B (19x trailing EBITDA), Brooks Life Sciences has rebranded as Azenta Life Sciences. A top performer in the ROBO Index, Brooks is up over 650% over the past five years, and up 58% YTD with strong revenue growth and industry tailwinds.

Brooks Automation originally began as one of the pioneers in the semiconductor fab production business, expanding into life sciences over the past decade. The latter quickly became the faster growing segment, playing into the cell and gene editing, mRNA, and precision medicine spaces by offering industry-leading lab process automation equipment for the most demanding, clean environments. This portfolio of solutions includes automated cold-storage and repository solutions for hundreds of millions of samples globally, genomic and data services, consumables, and proprietary instruments.

As an independent entity solely focused on the life sciences now, we believe Azenta, with over $2.5B in cash expected on the balance sheet and growing margins, will further invest internally and through acquisitions as a prominent player in the life sciences process automation space. Demand for their solutions will continue to grow, with an attractive 20% organic growth rate.

HTEC: Ongoing Digitization Driving Health Tech M&A

Innovation in molecular science, data analytics, and enabling technology is really taking off, and companies are racing to lock in their place to capitalize on new and growing markets. The key theme is the convergence of digital technology and medical diagnostics for early diagnosis and prevention.

For HTEC, there have been 73 deals (completed and pending) worth $50.1B made by index members as of September 1, 2021, on track to surpass full-year 2020’s total of 93 deals valued at $66.7B which had vastly overtaken HTEC index Members 59 deals in 2019 totaling $16.8B. We expect to see even more investment and M&A in the next few years as healthcare further adopts AI and other technology solutions that improve healthcare outcomes and reduce physician burnout.