Coalition, a provider of cyber risk insurance and security, seeks to consolidate the space and make other acquisitions while awaiting a reopening of the market for initial public offerings, according to co-founder and CEO Joshua Motta.

An in-house corporate development team, with close support from BDT & MSD Partners and Allen & Company, is scouting for targets domestically and to help accelerate an international expansion in Europe, he said.

Relationships with Morgan Stanley, Goldman Sachs and others are also being leveraged, he said.

The San Francisco-based unicorn wants to bolt on technological capabilities, add teams to dramatically accelerate initiatives and acquire other assets that advance strategic aims, Motta told Mergermarket last week on the sidelines of The Montgomery Summit in Los Angeles.

Coalition is approaching USD 1bn in annual premiums and has been cash-flow positive “for some time,” the executive explained.

Given the scope of the opportunity in the fast-growing cyber risk insurance market, the company is not overly sensitive to valuation cycles. “If it strategically makes sense, we’ll find a way to do it,” Motta said.

Valuations can be a challenge on the consolidation side, given that many of Coalition’s competitors are very large insurance companies that are not looking to divest their cyber businesses, he said.

In the case of potential venture-backed targets, many are among the companies that raised significant capital at valuations that they will likely have difficulty achieving, the CEO added.

It is hoped that M&A will play a role in the company’s expansion into Germany and Ireland this year, and across continental Europe in the years ahead. Appropriate targets in much of the world remain scarce, however, according to the operator.

While a couple of European players are trying to build disruptive startups in the category, the cyber insurance business is still not very mature in many markets the firm hopes to enter.

“Very often, it’s actually difficult to find an existing player,” he said. “Oftentimes, we’re the first player that’s not some incumbent insurance company.”

To date, new launches have been entirely organic efforts, Motta said.

Coalition does not anticipate raising another private round of growth capital before going public, nor has a raise been completely ruled out, he said.

Though the company has said publicly that it intends to list its shares sometime in the next “couple of years,” management has a more fluid timeline that suggests they could move fairly quickly after the IPO market returns to life.

While no underwriter has been hired, the firm has an executive team with significant public company experience and is already audited by the Public Company Accounting Oversight Board, according to Motta.

“We’re not trying to time anything,” he said. “It’d be great for there to be a couple of IPOs before us, just to get people back in.”

Going public represents “the ultimate exit for the company,” and would provide Coalition with access to capital to retain more risk in its insurance holdings, as well as liquidity for early investors and long-term employees, he said.

Doing an IPO during a less-than-ideal public market cycle can sometimes provide greater upside opportunity than going out at the top of a cycle, the CEO said of the team’s thinking. “I think great companies can go public, really, at any time,” Motta said.

Founded in 2017, Coalition has made at least four acquisitions since 2020, most recently the July 2023 purchase of New York-based B2C privacy, security and ID insurance firm Jumbo Privacy, which was valued at USD 77m, as reported.

Prior to that, the company made an August 2022 buy of Digital Affect Insurance Company – since renamed Coalition Insurance – which followed the buyer’s July 2022 Series F raise of USD 250m, at a valuation of USD 5bn, as reported.

Purchasing that Burlington, Vermont-based property and casualty insurer from Munich Re Digital Partners US Holding Corporation gave Coalition licenses to sell insurance in all 50 US states.

The market for cybersecurity insurance is projected to grow by up to 30% during the next 10 years and Coalition expects its growth to exceed that pace, Motta said in a presentation to investors.

Coalition has 180,000 customers, ranging from small businesses to publicly traded companies, he told the gathering.

Investors in Coalition include Allianz X, Valor Equity Partners, Kinetic Partners, Swiss Re Corporate Solutions, Arch Insurance, Lloyd’s of London, and Argo Group, as reported.

Other significant players in the cyber risk insurance space include Corvus Insurance, Cowbell Cyber, Trava, Resilience, Counterpart and At-Bay.