Is now the time for me to buy Avast shares?

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Over the past 12 months, I have looked at buying Avast (LSE: AVST) shares several times. I have always been attracted to the company’s position in the cybersecurity market, which is experiencing substantial growth.

As the world becomes more interconnected and dependent on technology, the demand for cybersecurity and similar products will only expand. 

Forecasts suggest the cybersecurity market will grow in size by around 11% per annum for the next decade.

Considering the company’s potential, I was not surprised by the cybersecurity business’s recent revelation that it was in negotiations with a US peer regarding a takeover. 

Avast shares on sale

Earlier this week, the group announced that it was in “advanced discussions” about a merger with NortonLifeLock. There is no guarantee any deal will come from the discussions. Norton has until August 11 to announce whether or not it intends to make an offer. 

Analysts are speculating that any agreement could value the UK-based business at around $8bn, or £5.8bn. At the time of writing, the company’s market capitalisation stands at £6.1bn. 

This suggests to me that the market believes a higher offer could be on the cards. I am inclined to agree. 

Still, it is impossible to say if an offer will emerge at this stage and at what price. Norton has not even submitted its bid price as of yet.

The cybersecurity market is incredibly competitive. And not only do individuals companies have to compete with each other, but they also have to invest heavily to develop the technology to fight off threats. 

Fighting on both fronts can mean unexpected costs. Considering the fact that all these companies are effectively battling the same threats, scrapping with each other seems like a waste of resources. 

Indeed, commenting on the deal rumour, Norton said that a merger “would bring together two companies with aligned visions, highly complementary business profiles and a joint commitment to innovation.

This is why a merger makes a lot of sense. It could even inspire a bidding war. 

No offer as of yet

I should note that there is no guarantee the two parties will sign any takeover agreement at this stage. There is also no guarantee Avast will become the subject of a bidding war. 

If a merger does not happen, the company may struggle to complete going forward in this incredibly competitive industry. It will become even more challenging for the group to compete if some of its US peers decided to merge. 

I am not going to buy Avast shares just because an offer might emerge. However, I would buy the stock for its growth potential. As the cybersecurity market continues to expand, I think the group, which is one of the largest in the space, should be able to capitalise on the market expansion. 

As such, even if no offer emerges for shares in the company over the next few weeks, I would buy Avast shares today.

The post Is now the time for me to buy Avast shares? appeared first on The Motley Fool UK.

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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Avast Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.