Korean giant LG has made its first acquisition in Israel, buying 64% of cybersecurity for vehicles company Cybellum Technologies for $140 million. The deal values Cybellum at $220 million. The investors are selling their shares, but the entrepreneurs and employees are retaining the remaining 36%. In addition, LG is investing a further $20 million in Cybellum in its largest fund-raising round so far, which will enable it to double in size.
Under the sale agreement, LG undertook to buy the rest of the shares in Cybellum at entry points within three or five years, such that the value of the shares that have not been sold, which is $80 million according to the current company valuation, could yet grow, giving the employees and entrepreneurs possible future gains. Cybellum, which currently has 50 employees, 35 of whom are in Israel, plans to double its workforce after the acquisition, which means that the unsold stake will be divided among a larger number of people.
The sale of a company in parts has become a trend. It allows the company s to relieve the pressure from venture capital funds to realize their holdings, while allowing the employees a longer horizon for future gains, among other things in order to assist in recruiting people, which is currently the hardest task for local technology companies.
For the investors, venture capital firms Blumberg Capital, Target Global, Azure Ventures, and RSBG Ventures (the venture arm of German company RAG), the deal represents a good return on a total investment of $14.5 million over the three years from 2017 to 2020. In its last fund-raising round, in July last year, Cybellum was valued at just $37 million, which means that its value has grown by 600% in about a year.
Cybellum was founded in 2016 by its CEO Slava Bronfman and CTO Michael Engstler. Initially it dealt with protection of physical systems of vehicles, but later switched to protecting vehicle software systems, in particular the source code of digital systems, enabling vehicle manufacturers to access software of peripheral equipment to ensure that it does not expose the vehicle to unnecessary risks. New regulation obliges manufacturers, which were previously blind to the source of code of third party systems, to understand the weaknesses of these systems and in effect carry out a process of risk management. Cybellum is thus a preventative cybersecurity company, identifying weaknesses and risks and offering ways of fixing them whether in the manufacturing process or after the vehicle has left the factory.
"This investment underscores the importance of this growing category and is a key part of LG’s strategy to strengthen its business portfolio through strategic acquisitions, alliances and partnerships, with a strong focus on its vehicle components business. In August 2018, LG acquired Austria’s ZKW Group, a leading player in the automotive lighting market. In July, LG launched a joint venture with Magna International, the world’s third largest auto supplier, to create LG Magna e-Powertrain, boosting the competitiveness and future growth potential of both partnersת" LG's announcement of the acquisition said.
"It’s no secret the critical role software plays in the automotive industry and with it comes the need for effective cybersecurity solutions," said Dr. Kim Jin-yong, president of the LG Electronics Vehicle component Solutions Company. "This latest deal will further strengthen LG’s solid foundation in cybersecurity, enabling us to be even more prepared for the era of connected cars."
Published by Globes, Israel business news - en.globes.co.il - on September 23, 2021
© Copyright of Globes Publisher Itonut (1983) Ltd. 2021