UK regulator makes U-turn on Avast-Norton cyber security deal

Shares in UK-listed cyber security group Avast jumped more than 40 percent after the competition regulator made a U-turn and announced that it would clear an $8bn merger with US software company NortonLifeLock.

The Competition and Markets Authority provisionally agreed to the deal on Wednesday, saying there was sufficient competition from the rest of the market, including from rival McAfee.

The CMA had said in March that it was worried the merger would reduce competition and raise prices for consumers. In its initial probe, it found that a lack of significant rivals could lead to a “worse deal for customers when looking for cyber security software”.

However, on Wednesday the regulator said that after a more detailed analysis it had concluded that the merged businesses faced “significant competition” from McAfee and a range of other suppliers.

The watchdog will now accept responses from interested parties before publishing a final report in September.

The companies had originally hoped to close the deal in April. In a statement on Wednesday, NortonLifeLock said September 12 was the first possible date for closing under the CMA’s timeline.

The company said it intended to “work with the CMA and with Avast to enable the CMA’s final report to be issued as soon as practicable”.

Avast shares rose nearly 43 percent to 682p in early London trading.

The cash-and-stock deal announced in August valued Avast at between $8.1bn and $8.6bn and would create a business selling security software to half a billion customers.

The CMA said on Wednesday that cyber security was a “rapidly evolving” market, adding that “providers of both paid-for and free services are continuously developing and improving their products over time to meet different and changing customer needs”.

Kirstin Baker, chair of the CMA inquiry group, said: “After gathering further information from the companies involved and other industry players, we are currently satisfied that this deal won’t worsen the options available to consumers. As such, we have provisionally concluded that the deal can go ahead.”

NortonLifeLock chief executive Vincent Pilette has indicated that he plans to cut 1,000 jobs from the combined group. The deal will give the enlarged business more sway in an increasingly crowded market. Big Tech groups such as Google, Microsoft and Apple are increasingly building security protection directly into their operating systems.

Prague-based Avast was founded in the 1980s and became one of a handful of dominant businesses in the consumer cyber protection market. It went public in 2018 in one of the UK’s biggest tech listings at the time.

Avast’s chief executive Ondrej Vlcek, who steered the company through a revenue-boosting pandemic as people spent more time online, will become president of the combined business under the deal.

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