WithSecure: Divesting Cyber Security Consulting Business for Strategic Growth

WithSecure Corporation, a leading cyber security provider, has announced its decision to divest its cyber security consulting business to Neqst, a Swedish investment firm focusing on technology and technology-enabled companies. This strategic move, announced on 23 January 2025, aligns with WithSecure's updated strategy, first revealed in October 2023, which focuses on serving mid-market customers with the Elements Cloud portfolio and scalable Co-security services through the partner channel.

The divestment of the consulting business, which provides world-leading offensive security consultancy services, is expected to bring several strategic benefits to WithSecure. Firstly, it allows the company to concentrate on its core business and better serve its target market. WithSecure's updated strategy emphasizes focusing on its core differentiators: the Elements Cloud technology platform, Co-security services, and the comprehensive partner approach the company is known for. By divesting the consulting business, WithSecure can allocate more resources to these core areas and further develop them to better serve mid-market customers.

Secondly, the divestment allows WithSecure to strengthen its market position in Europe and Japan, where it believes there will be a growing need for European sources of world-class cyber security technology due to geopolitical uncertainty. By focusing on its core business and divesting the consulting business, WithSecure can better position itself to capitalize on this growing demand.

From a financial perspective, the transaction is expected to result in an impairment cost of approximately EUR 13 million in the fourth quarter of 2024, which will be recognized as part of the discontinued operations result. However, the divestment also brings in a total enterprise value of EUR 22.5 million, with 60% payable as fixed cash upon completion. This transaction allows WithSecure to achieve an efficient capital structure that ensures the functioning of business operations and promotes the increase of shareholder value.

The variable purchase price structure, which accounts for 40% of the total enterprise value, is based on the performance of the cyber security consulting business in 2025 and 2026. This structure impacts the valuation of the consulting business and the potential future growth prospects for Neqst in several ways. Firstly, it ties the valuation of the consulting business to its actual performance, incentivizing Neqst to focus on improving the business's performance and driving growth. Secondly, it allows Neqst to balance risks and rewards, aligning the interests of WithSecure and Neqst. If the consulting business performs well in the future, Neqst could receive a higher variable purchase price, leading to a higher overall return on investment. However, if the business does not perform as expected, Neqst's total investment will be lower, reducing the potential loss.

In conclusion, the divestment of the cyber security consulting business brings several strategic benefits to WithSecure, aligning with the company's long-term objectives. The variable purchase price structure allows Neqst to balance risks and rewards, align interests with WithSecure, and potentially achieve higher returns if the consulting business performs well in the future. This strategic move positions WithSecure for continued growth and success in the mid-market cyber security space.