According to industry sources, SAFE Security has been acquired by AAA Northern California, Nevada and Utah (AAA NCNU) for an undisclosed sum. The transaction officially closed on Nov.2.
Based in San Ramon, Calif., SAFE Security is a provider of smart home and business security services, boasting a significant market presence within the residential and commercial alarm industry. Founded in 1988, the company provides monitoring services, installation, maintenance and other related services to homeowners and businesses across the nation. The company will reportedly continue to operate as an independent subsidiary of AAA.
SAFE Security has been under the ownership of N.Y.-based private equity firm ICV Partners since late 2012. SAFE made headlines last year after a federal court in Alaska awarded it a $1.5 million judgement for a lawsuit it filed against rival Alder Holdings for engaging in deceptive trade practices, among other charges.
Imperial Capital served as the exclusive financial advisor to AAA NCNU in the transaction.
AAA’s Impact on the Market
At first blush, the entrance of AAA – a more than 100-year-old organization focused on the American automobile industry – into the residential industry may seem like an awkward fit but, according to Michael Barnes, Founding Partner of Barnes Associates, an investment banking firm that offers financial advisory services to the alarm industry, they are just one of a number of "recurring revenue familiar" players that have been looking into the space, and AAA’s interest in the industry makes perfect business sense.
“The (security) industry provides a high-value service, using great technology, and with a prominent hub and communication within the home. If you went looking for an underpenetrated, emerging recurring revenue-based, low churn service-based business to bundle or co-market with, the security alarm industry is attractive,” Barnes says. “Additionally, consumers trust their security alarm company to provide comfort that they will be there if something goes wrong, which is a theme that resonates well with AAA’s core service offering.”
In addition to acquisition serving as a strong endorsement of the security industry itself, Barnes says it is also notable that AAA NCNU decided to acquire a traditional alarm dealer as opposed to a DIY upstart. “The Do It For Me (DIFM) full-service business model would seem to resonate better with their brand,” Barnes adds.
Blake Kozak, Principal Analyst for Smart Home and Security Technology at IHS Markit, characterizes the acquisition as a “interesting fit” for AAA NCNU given SAFE Security’s focus on optional services, such as extended service plans and guard services. However, because SAFE is only estimated to have about nine percent of its residential monitored accounts leveraging interactive services, Kozak says there could be an opportunity for AAA to expand its support services to include such things as monitoring for water leaks, maintenance and repairs of other households items, or even offering additional insurance options for connected devices.
“Given the history of AAA as it relates to automobiles, mapping and recent work to keep seniors on the road longer, there are many different directions (from a connectivity/IoT perspective) that AAA and SAFE Security could develop programs and services for the connected home, effectively bridging the various parts of daily life – from driving to the home environment,” Kozak says.