Czech-based cybersecurity firm Avast (GB:AVST) and U.S.-based NortonLifeLock (Nasdaq:NLOK) have received the go-ahead for their merger which will see both companies combine in a cash and stock transaction valued at around $8.6 billion.
Britain’s Competition and Markets Authority (CMA) blessed the deal after an in-depth investigation started in March 2022. It cleared the deal after it was satisfied that the merged entity wouldn’t harm competition in the UK market.
Avast’s shareholders welcomed the news, and the stock went up to an all-time high of 688.4p. In the last three years, Avast’s stock has given a 127.7% return. The company is witnessing good revenue growth amid strong demand for cybersecurity solutions.
Norton’s stock went 6% up post the approval news.
Avast and NortonLifeLock, provide a wide variety of cyber security products and solutions.
The deal and the synergies
In July 2021, both companies were in the final stages of discussion and were near to closure. However, the deal has been pending since then after it came under the radar of UK regulators.
The CMA was worried that the deal could pose a serious threat to competition in the cyber-security market.
The companies believe the merger will expand their markets globally and that the combined entity will serve around 500 million customers. The product lines of these companies complement each other and they expect to generate operational and financial synergies.
Vincent Pilette, Chief Executive of NortonLifeLock. “With this key milestone behind us, we are looking forward to driving innovation and taking cyber safety to the next level.”
Avast’s chief executive, Ondrej Vlcek, will lead the combined entity as its chairman.
View from the City
According to TipRanks’ analyst rating consensus, Avast’s stock has a Moderate Buy rating. The stock has ratings from three analysts, out of which two are Hold and one is a Buy rating.
The average price target is 561.67p, which is 17.6% lower than the price level of 681.4p. The analyst price targets range from a low of 515p to a high of 620p.
The approval from the CMA came as a pleasant surprise for both companies.
The investigation also highlighted the growth prospects for cyber security solutions for these companies.
The shareholders of both companies now await the final decision, which is expected by September 2022.