It has been written before on these pages and others, but if you didn’t believe that industry consolidation is a real thing, just take a look at the headlines — consolidation is happening all around you.
DVTel is now FLIR. NICE Security is Qognify. Siemens security products are now Vanderbilt. Security industry stalwart names like Diebold and Tyco are the latest “victims” — in fact, unless you work in banking, you are unlikely to ever see the Diebold name again when it comes to security.
Three recent and major M&A moves — Johnson Controls’ merger with Tyco, Securitas acquiring Diebold, and Apollo Global Management’s acquisition and subsequent merger of ASG Security and Protection 1 — prove that consolidation is not limited to just security industry manufacturers.
*Breaking addition: Apollo announced on Feb. 16 that it will buy ADT and merge it with Protection 1.
To put it into perspective, TycoIS is estimated by IHS to be the largest integrator in the world, and Johnson Controls is ranked No. 10 on the same list. The two companies would have a combined share greater than 5 percent of a global market worth around $62 billion. Despite this, the security integration supply base would remain highly fragmented, with the top 15 integrators accounting for only around 20 percent of revenues.
“As price, brand and channel strategy continue to gain importance, this is expected to drive further consolidation in the security system integration market,” says IHS Senior Security Analyst Paul Bremner. “Larger players are likely to acquire smaller companies in a bid to expand their footprint in complementary geographic regions.”
But there’s more happening than just the unification of giants. Growing integrator Dakota Security has been acquired by Convergint. Three of ADT’s biggest dealers have merged to form a single company, SafeStreetsUSA. Countless mom-and-pop operations have been acquired and folded into larger operations in the past couple years alone.
According to the results of a survey conducted by Capital One at the recently held Honeywell CONNECT conference, 68 percent of the security business owners and managers polled said they expect to complete at least one acquisition in the next year. A significant 16 percent said they expect at least three acquisitions.
So what does all this mean to integrators? When it comes to the consolidation of manufacturers, distributors and monitoring service providers, whether or not it is a good thing is usually murky. “Anyone who is our business has experienced the ramifications of consolidation — some good, some not so good,” says PSA Security Network president and CEO Bill Bozeman. “I have personally experienced both.”
Case in point: Consolidation can potentially increase quality and choice for the dealer/integrator. “This would, in turn, improve competition, which raises everyone to a higher standard – an overall positive,” explains Qognify’s Dr. Bob Banerjee.
However, if you just standardized on “Vendor X’s” video surveillance product line and sent four of your technicians to a three-day certification workshop; only to see Vendor X get acquired by Vendor Y, who is rebranding the entire product line — you get the picture.
Perhaps more important for security dealers and integrators is to be nimble and ready — whether you intend to sell your security business or not. You never know when a big integrator will come knocking on your door, anxious to expand into the very market you are capably serving
“To maximize the value of your accounts, whether you are contemplating a partial or complete sale of your customer base, participating in a dealer program, or making a complete exit from your business, you need to establish your company as a high-value business,” explains Amy Kothari, president and CEO of Alarm Capital Alliance (read more at www.securityinfowatch.com/11313469).
