In its third-quarter earnings report released last week, ADT announced that it has acquired Florida-based Devcon Security for $148.5 million. The acquisition includes 117,000 customer sites with total recurring monthly revenue of $3.6 million.
According to Don Boerema, senior vice president and chief corporate development officer for ADT, the acquisition is a “perfect fit” for the company given the similar profile and quality of customer that Devcon has.
“They’ve got real good (employees) overall that we’re impressed with and they have some really good processes in how they support the different groups of customers they have ; a residential base, a homeowners’ association base and a small-to-medium-sized business base,” Boerema said. “We’ve always respected them as a competitor and now we’re looking forward to learning and partnering with them going forward in putting the two companies together.
Boerema said that Devcon’s geographic footprint is made up of accounts primarily in Florida and New York (predominantly New York City). Devcon expanded into between 40 to 50 markets at one point in time under an ambitious expansion plan, however, Boerema said that plan didn’t really pan out, at which point they had to refocus on their core business in the aforementioned markets. Boerema said that Devcon is really a leader when it comes to working with the homeowners’ association market due to all the moving parts that are involved.
“Many times they are supporting these gated communities and they have to work with a management association and typically a guard gate, as well as all of the individual homes in all of those different areas,” he explained. “They have a very good model and some great solutions that they provide to that whole business. We’re looking forward to, where appropriate, rolling that out across the country also.”
Boerema said that the acquisition was closed on Friday night and that they are just beginning the process of planning how Devcon will be integrated into ADT. Although they are still the market leader in terms of market share, Boerema said that ADT continues to look at ways to grow the business, whether it is organically or through mergers and acquisitions.
“The security market is very, very fractured. Even with us being the size that we are, we still only have, depending on what research you look at, maybe a quarter of the market approximately or somewhere in that ballpark,” he added. “So, there is 75 percent of the market that is still a (business) opportunity. On top of that, the market is growing and expanding because only about one out of five homes use home security and automation.”
According to Boerema, there are several factors within the marketplace that are motivating some people to exit the industry. “There are a lot of private equity guys that are ready to exit. There are things that you have when you look at the new competitors and they can’t compete against that,” Boerema said. “I think, over time, it’s going to be tougher for the regional players to compete with a lot of big nationwide players.”
Though the recent entry of large telco and cable firms to the market has been viewed as a threat by some, Boerema believes this trend will actually be beneficial when it comes to growing the pie for everyone involved.
“To be honest with you, I think they are being helpful,” he said. “In the past, we were the only one building the category and really advertising and promoting it. Now that you have new competitors that have pretty large marketing budgets and some great brands and they’re doing some good things in the marketplace, what it’s doing is allowing us to increase the penetration of that market that is not using our service today. It’s an opportunity for us to capture growth in that new expansion of the category also.”
