Over past decade or so, residential security providers have attracted massive interest from a variety of industries – from telecoms to huge tech companies like Google and Amazon, to insurance providers – all looking to gain a greater foothold in the modern smart home via acquisition of customers and data.
On Tuesday, you can add the first major energy provider to that mix, as NRG Energy announced its acquisition of Vivint Smart Home for $2.8 billion in cash.
“Two years ago, [analysts were asking] who would be likely buyers – maybe a larger security company,” says Brian Ruttenbur, Managing Director of Imperial Capital. “In the last 12 months we’ve seen telecom, tech, insurance and now energy getting involved as multiple buyers of these companies. Now we just keep going 'and…and…and' – adding who else is going to buy them.
“In terms of partnerships, there are so many things going on that security is no longer security. It overlaps into so many different areas,” Ruttenbur adds. “You've got ADT with Ford, Google, Lyft and State Farm; you've got Safe Security and AAA. I think the State Farm deal is going to be mimicked in the industry. There used to be clear line. Now there's no line between where to security stop and start and where do all these other services start and stop?”
Clear Benefits
For its part, NRG Energy sees clear synergies and benefits by marrying its in-home energy offerings with Vivint’s smart home and security, as well as solar offerings. During a conference call announcing the acquisition, NRG President and CEO Mauricio Gutierrez explained that NRG began by evaluating customer needs and adjacent areas of expansion, such as home solar, EV charging and batteries.
“The feedback we received matches many of the macro trends we all know are true: Electrification continues to grow, cleaner and more resilient energy is needed at home, simplicity matters, and brand trust is everything,” Gutierrez said. “It became clear that there was a tremendous opportunity to bring together an integrated ecosystem of connected products and services.”
Vivint’s proprietary smart home platform will do just that, with the added bonus of bringing the Vivint Solar capabilities to NRG customers as well.
“Everyone needs power, cleaner and more resilient energy is in demand, and people who own their home want to protect it,” Gutierrez said. “More than ever, consumers have an expectation that all of these pieces can be connected in a way that provides a seamless experience. That is what NRG plus Vivint will do together.”
Massive Increase in Potential Customers
In much the same way that telecom providers gave the industry access to new security customers, merging with NRG Energy will provide Vivint with approximately 5 million potential new customers; in fact, Vivint CEO David Bywater cited a combined reach of more than 7.4 million customers.
For NRG, it means adding 2 million [Vivint] customers with “with an average customer lifespan of nine years and growing,” Bywater said.
“We will double our customer growth targets two years ahead of schedule,” Gutierrez added.
“[Vivint] has a very loyal, long-term customer base that is willing to pay $80 to $90 a month for a product, and now [NRG and Vivint] can sell other products to that customer base,” Ruttenbur says. “I think that's a value even in bad economic times, which is arguably where we are. [NRG] has done the math. There's obviously synergies, but there's also an incredible recurring customer base that they are going after.”
Customer Data to Drive Further Activity?
More than most industries, major home security companies have a treasure trove of data on millions of its subscribers. Access to this data, for example, is what prompted State Farm to buy a major piece of ADT in September, and Gutierrez and Bywater both mentioned during the conference call that NRG intends to leverage Vivint’s vast amount of data as well.
“Because we own our back end, we have over 1.4 billion events per day of data,” Bywater explained. “This will allow us to bring a very intelligent ecosystem to NRG fueled by AI and machine learning. The richness of that data will significantly benefit our ability to serve our customers.”
“Covering intelligent security intelligence companies, [I have learned that] it's all about the data,” Ruttenbur says. “Data is valuable, especially when you've got this great customer base that's very loyal, and you know everything about that customer base. That data is becoming valuable to tech, telecom, and a lot of industries beyond, like energy. Down the road, the ADTs, Brinks – those companies [with extensive data on large customer bases] – will just become more and more valuable.”
The Vivint Rollercoaster
The acquisition of Vivint continues a rollercoaster ride for the company in the past two years, with newsworthy events including:
- An as-yet unsettled legal patent infringement battle with ADT, where both sides have sued each other over the patents on various technologies;
- Company founder Todd Pedersen suddenly stepping down as CEO in May 2021 and being replaced by Bywater, who was CEO of Vivint Solar, two weeks later;
- A $20 million settlement with the Federal Trade Commission regarding a Fair Credit Reporting Act (FCRA) claim;
- A dispute with Alarm.com over the payment of license fees; and
- A newly formed partnership with New American Funding, one of the nation’s largest independent mortgage companies.
Moving forward, it is currently unclear whether Bywater and the Vivint leadership team will stay on once the transaction is approved and completed, which is expected to happen in the first quarter of 2023 subject to customary closing conditions.
SecurityInfoWatch has reached out to both companies for clarity on this issue.
Paul Rothman is Editor-in-Chief of Security Business magazine, a printed partner publication of SecurityInfoWatch.com. Access the current issue, archives and subscribe at www.securitybusinessmag.com.
