Avast woos AVG shareholders with $1.3bn buyout offer

Merger is to corner market rather than snaffle rival's tech

Avast is offering to buy anti-virus rival AVG for $1.3bn. AVG shareholders are being offered $25.00 per share in cash, a 33 per cent mark-up on the closing share price on Wednesday.

AVG, Avast and rival Avira are the three main players in the market for freebie anti-virus scanners for Windows. All make their money by offering security software to consumers for free in the hopes that a substantial proportion will upgrade, known as the freemium model.

Each also sells Windows security software to small enterprises. All three sell mobile security software for Android devices.

Avast's planned acquisition of AVG will signal a radical industry consolidation. The deal is driven by market imperatives rather than a pressing need to acquire AVG's technology.

“Avast is pursuing this acquisition to gain scale, technological depth and geographical breadth so that the new organisation can be in a position to take advantage of emerging growth opportunities in Internet Security as well as organisational efficiencies,” Avast said in a statement.

Combining Avast's and AVG's users, the organisation will have a network of more than 400 million endpoints, of which 160 million are mobile. Opportunities for growth for the combined firm centre around securing the fast-expanding Internet of Things market, internet-connected devices that cover everything from cars and smart meters to fridges and smart TVs.

"Combining the strengths of two great tech companies, both founded in the Czech Republic and with a common culture and mission, will put us in a great position to take advantage of the new opportunities ahead, such as security for the enormous growth in IoT,” said Vince Steckler, chief executive officer of Avast Software.

Gary Kovacs, chief executive officer, AVG, added: "Our new scale will allow us to accelerate investments in growing markets and continue to focus on providing comprehensive and simple-to-use solutions for consumers and businesses alike.”

Consolidation in the sector to increase scale and minimise the effect of overheads was perhaps inevitable. Microsoft has steadily improved the baseline security protection for various versions of Windows, a factor that may have eaten into the desktop market of the likes of AVG and Avast. Sales of security software to consumers have been flat or declining for years, spurring a need for diversification that bigger rivals such as Intel Security and Symantec are also struggling to accommodate.

Mobile security sales offers some potential – though, perhaps, not enough to offset the effect of a flat desktop market. In response, anti-virus vendors have begun exploring ways to work more closely with advertisers; a problematic relationship at best for firms selling privacy protection alongside security.

For example, AVG sparked controversy last year when it changed its privacy policy to allow it to collect and resell users’ anonymised web browsing and search history. The firm told El Reg at the time that it had no immediate plans to sell users' data to advertisers, adding that if (and when) it does seem this data will be sold on, it will be anonymised so that individual users can’t be identified. ®

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