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NortonLifeLock (NLOK) in Talks to Buy UK's Cybersecurity Firm Avast

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NortonLifeLock (NLOK - Free Report) on Wednesday confirmed that it is in advanced talks over a merger with the U.K.-based cybersecurity firm Avast. However, the U.S.-based company stated that there is no certainty as to whether or not any transaction would actually take place.

The deal, if materializes, would be a combination of cash and stock, NortonLifeLock noted in its statement. The company also stated that it has to make either a firm announcement to make an offer for Avast or that it does not intend to make an offer.

Acquisition Makes Sense for NortonLifeLock

If the deal goes through, it will help NortonLifeLock enhance its product portfolio and customer base. Avast primarily makes free and premium security software for desktop and mobile devices, while NortonLifeLock primarily deals with consumer cyber safety.

The deal bodes well for the company’s focus on enhancing Cyber Safety solutions amid rising digital activities. With a strong data protection portfolio, the company will be able to ensure cyber safety of its existing as well as prospective customers. Additionally, the acquisition would strengthen its international footprint by gaining exposure in Europe and key emerging markets.

Solid Cybersecurity Demand Driving Growth

NortonLifeLock’s shares have rallied 29.5% year to date compared with the S&P 500’s gain of 17.1%.

Zacks Investment Research
Image Source: Zacks Investment Research

This outperformance is largely driven by solid adoption of the company’s cybersecurity and information backup solutions owing to the surge in hacking events and data breaches, globally.

Per the IDC’s report, worldwide security spending is expected to reach $174.7 billion in 2024, reflecting a compound annual growth rate of 8.1% from 2020-2024. NortonLifeLock is poised to benefit from an increase in security spending by enterprises.

Additionally, the company launched solutions such as Norton 360 for Gamers, which promotes cybersecurity in the gaming space and Norton 360 with LifeLock for family, an all-in-one protection plan to help protect the whole family’s identities, devices and online privacy. It has also expanded its privacy offering by introducing Privacy Monitor Assistant, which helps customers reclaim control over their personal information.

The new capabilities are likely to drive innovation in the company’s product portfolio as well as bolster user acquisition and engagement on its platform, thereby aiding the top line.

Zacks Rank & Key Picks

Currently, NortonLifeLock carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Digital Turbine (APPS - Free Report) , Intuit (INTU - Free Report) and Zoom Video Communications (ZM - Free Report) , all sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Digital Turbine, Intuit and Zoom is currently pegged at 50%, 14.8% and 15.6%, respectively.