Investors Line up to Grab a Share in Atos’ New Spinoff Evidian in High-Growth Cybersecurity Market

In June 2022, Atos presented a strategic plan to split its business in two. The first would retain the Atos name and effectively regroup the firm’s data center and consulting services, which has been struggling in the last few years in the face of massive cloud migration. The other would bring all of Atos’ more successful cybersecurity business under a new company named Evidian. The latter would also fold in Atos’ big data and digital transformation business.

The split is expected to be completed in 2H 2023, with Evidian’s eventual listing in the stock market. Atos would distribute 70% of Evidian’s capital to shareholders, while retaining a 30% share. However, Atos is also contemplating financing its future strategic plan (for the newly slimmed down Atos business) by ceding part—or all—of its 30% share in Evidian to external investors.

A number of French firms have been jostling each other for the last 6 months in a bid to secure a share in Evidian; among them are Airbus, Thales, Onepoint, Orange, and Astek. Atos has already rejected a €4.2 billion offer from Onepoint back in November 2022, and another €4.7 billion from ICG (a private equity firm).

Atos’ June 2022 decision to split the business comes amid a flurry of activities last year for the firm; it ceded its test satellite business to a company in Denmark, a retail logistics solution to one in Spain, and its Italian operation to another in Italy. Atos also laid off more than 12,000 staff last July.

From a security perspective, Atos sold off its stake in ex-subsidiary Worldline for €220 million. Payments provider Worldline offers the ADYTON payment Hardware Security Module (HSM), an established product that has been present in the market for almost 30 years. Atos offers a General-Purpose (GP) HSM as well, the Trustway Proteccio. This means that Atos, through ADYTON, is a well-established HSM player, offering both types of HSMs in a relatively niche market, which is undergoing significant transformation and expected to reach over US$1 billion in revenue by 2024. Atos, while not the leader in the HSM space, is still a trusted and global brand nonetheless. Thales, in fact, is the current leader (in terms of market share) within both the payments and the HSM spaces. If Thales were to successfully take a share of Evidian, it could boost its position in the HSM market, and gain some insight and influence into Atos’ Trustway line.

Thales seems to be in good stead to take over the Evidian stake. Thales and Atos have worked together on the Artemis.IA project for ATHEA, a solution focused on Artificial Intelligence (AI) applications for the defense sector. The project is for the French Defense Procurement Agency. There has been some speculation in the French media that the French government is, in fact, backing a Thales investment, although government officials have not substantiated these claims. For Thales, the interest in Evidian is not just strictly about cybersecurity, but also about the secure communications systems Atos has developed for military vehicles. This is likely the reason Airbus has also displayed interest in the purchase, though it has restructured its own cyber activities under a new group named Airbus Protect. This makes the Airbus strategy highly synergistic with an investment in Evidian.

Clearly, there are some big players looking under the hood of Atos’ cybersecurity business, and the appeal is gaining a wider audience. Atos’ cybersecurity revenue in 2021 was estimated at €5.1 billion, and even a minority stake would confer significant competitive advantages to buyers, in both the cybersecurity and defense spaces; and not only in France, but globally, too.

Atos has officially opened up talks with investors as of 2023, although it has been unofficially talking with potential stakeholders since it made its announcement to split the business back in June. However, much of the information regarding potential investors and details of talks is being kept under wraps. Atos has some ambitious plans for its data center business, but it is reacting late to the cloud phenomenon, requiring a herculean transformational effort to overcome its setbacks. Similarly, in the HSM space, while it has a leading product, it has not evolved as fast as others in the field, but the potential is there.

For investors looking at Evidian, there is clearly a significant opportunity there to build out and bring Atos’ cybersecurity solutions to the next stage. Atos’ solutions are well-established in the market, but they could have much further reach with a better market strategy, and while it may not have the clout or influence of Airbus, Thales, or Orange, its security and military solutions are leading edge and well used by high-profile clients, including the French government. It is not surprising, therefore, that a share of the Evidian pie should come at a multi-billion dollar premium. The success of Evidian will require strategic leadership and an eye for innovation. For those potential investors, a stake in Evidian could bring significant competitive advantages if their cards are played right.