Despite digital and telecoms having emerged as one of the most active sectors for UK dealmaking in recent years, close to two-thirds of investors in the Digital & Telecoms infrastructure sector say they have had a deal fall through as a result of cybersecurity risk over the past three years.
The latest Investor Sentiment Report: Forces of Change poll from global corporate intelligence and cybersecurity consultancy S-RM found that cyber risk was the highest reported cause of deal failure in the sector (cited by 65 per cent of investors). This put it ahead of both regulatory instability (41 per cent) and geopolitical risks (37 per cent).
The report, polling 150 global investors across infrastructure sub-sectors, also found that cybersecurity risk is the biggest factor influencing investment decisions across the Digital & Telecoms market.
76 per cent of respondents cited cyber risk as the main factor influencing dealmaking decisions, slightly ahead of sustainability risks (75 per cent) and regulatory instability (72 per cent).
According to S-RM, the Digital & Telecoms infrastructure market’s critical role in supporting digital, data and connectivity services means it is uniquely exposed to cyber-threats.
Investors polled by S-RM identified a number of cyber-related issues that have impacted dealmaking most severely:
- Exposure to ransomware and cyber extortion (58 per cent)
- Weaknesses in operational technology and network security (52 per cent)
- Third-party and supply chain cyber vulnerabilities (47 per cent)
- Data protection and privacy risks (44 per cent)
- Legacy systems and outdated infrastructure (39 per cent)
However, the survey also demonstrated strong deal appetite within the sector despite these risks. 79 per cent said that the industry represented an attractive investment opportunity over the next five to ten years, ahead of the Energy & Environment (75 per cent), Social (71 per cent) and Transport & Logistics (67 per cent) markets.
Cyber risks are expected to intensify over the coming years, with 55 per cent of respondents saying they expect cybersecurity risks to increase, compared to 31 per cent who anticipate they will remain at their existing levels.
Either outcome would drive sustained pressure on M&A execution, something that is prompting investors to direct an increasing level of resources towards cybersecurity, which was ranked as the top non-financial risk area seeing higher budget allocation.
Ian Massey, Head of Corporate Intelligence, EMEA at S-RM, commented: “Investors in Digital & Telecoms infrastructure are navigating a market where cyber risk has become a defining factor in deal success. As assets become more connected and operational technology more exposed, cyber resilience is increasingly determining whether transactions proceed, alongside broader geopolitical and regulatory pressures. ”
“Encouragingly, investors have recognised cyber security as the primary threat to value and are allocating greater resources to managing and mitigating these risks. With threats expected to intensify over the coming years, those who embed cyber resilience early in the investment lifecycle will be best placed to protect value and capitalise on continued demand for digital infrastructure.”
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