When the world leader in open video management software (VMS) is acquired, it’s not surprising that it results in many hundreds of column inches of widely differing opinions; usually surrounding the impact it could have on VMS and the wider implications for the IP video surveillance industry. Some of this discussion has focused on why Canon and not a major camera manufacturer like say Axis?
It surprised many in the industry that Canon, not a big player in the network camera market, should steal this coveted prize from right under the noses of the major camera manufacturers. But it’s more likely that these major players decided it could have a negative effect on their camera sales. Would their customers prefer the status quo of independently selecting a VMS supplier?
We suspect that they canvassed a number of customers and, on balance, found that the cons outweighed the pros and the risk of buying into the VMS business (incidentally one order of magnitude smaller) would not be worth taking.
So, if this theory is correct, why would Canon be prepared to take this risk? Well they have less to lose and a lot more to gain. They have much expertise in camera technology but have so far failed to combine this with application know how on the technology/commercial aspects of the video surveillance business, which would enable them to compete with the best camera manufacturers in the world.
The synergy of this acquisition is that they can learn this from Milestone. For Milestone, they will gain investment dollars and move their product development on to consolidate their current position in VMS and enlarge their scope to take in integration opportunities in access control and beyond, possibly moving on to other aspects of control and monitoring, the built environment and taking advantage of the current hype surrounding the Internet of Things (IoT). The acquisition certainly creates a significant new player in the global video surveillance market.
While financial details have not been disclosed, an exit valuation on 2013 revenue of around 2.5x to 3x revenue looks likely based on findings from our annual report on M&A and investment activity in the physical security business.
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