Ken Kirschenbaum And RMR 2018, 2020, 2021

About your excerpt from Kirschenbaum Newsletter.   Ken probably would ask you to post the rest of the article to be more accurate. (Note.. I am not a spokesperson for K&K just one of his subscribers).

Most of us insiders agree that the term “multiples” is almost a meaningless term without lots-and-lots of other support data. Buyers focus on “future value”, whereas sellers focus on “current value”. Very different. No need for the technical detail this post, but a typical RMR portfolio could have over 15 different types on monitoring RMR, ranging from long-term mandated fire systems, to short- term elder-care PERS. A portfolio with all mandated fire systems could attract over 50x, whereas eldercare PERS might struggle to get 12x.

However generalizing with 35 X “as a ceiling” could be appropriate if specifically referencing “deterrent type” RMR systems. These are outdated systems, residential and commercial, from the 50 year old business model that are mostly simple motion sensors and warning signs, intended to deter the bad guys with the threat of rapid police response. Also the cause the false alarm problem that now delivers slow or no police response. The majority of monitored systems in the US are these low priority deterrent systems. Historically, the typical portfolio of RMR systems was co-mingled with the higher priority “defensive systems”. Defensive systems are remote witnessed threats via audio and video and analytics. Deterrent systems will see lower multiples, whereas defensive systems will keep their high or higher multiples. Yes… VERY confusing!

Special note: The two public companies, ADT/Apollo and ASCENT/ Moni both are scraping the bottom their market value. Moni dropped from $88 to $2, and ADT was near the bottom @$7. Both firms have heavy inventory of low priority deterrent systems.

Source: Lee Jones; Support Services Group; LeeSSG@att.net

Kirschenbaum has objected to this member's comment and title. We are citing his May 18, 2018 post to explain Kirschenbaum's current position:

Fortunately for the alarm industry, the multiple has been fairly constant for a long time. Depending on how you have run your business, particularly which contracts you use and how you get them signed, you can expect 35 times, give or take 5 times. That leaves a 10 point spread, and if you're on the lower end, you deserve it. If you're on the higher end, you deserve it too. Being smart should have its advantages, and in this business it’s measurable, 10 times.

Note: I've also changed the title since the member claimed he knew what Kirschenbaum 'thinks' and Kirschenbaum says he does not think that.

Having sold an alarm company, and working with others that have, the determination of value changed from the days of old and frankly the RMR multiple is just a way to guestimate the actual cost/sale price.

If I have 500 home or small business accounts that are paying me a monthly fee of $20.00 per month and the contracts are now at least 3 years old, and the services rendered is only burglary and panic alarm signals over a Central Station owned telephone line or many  lines that can't be forwarded.  I would get a very low RMR.  All they are buying is the revenue stream and a lot of work to move the accounts.

If I have 20,000 home, business, fire accounts that are paying me between $20.00 and $120.00 for services including burglary, panic, fire, open/close status, cellular backup,  with a Central Station I manage and own my lines on along with inspections and I have a installation volume of $10,000,000.00 per year I will get a much higher purchase price because they are buying an ongoing business and revenue stream.

The amount of due diligence can be surprisingly similar. IMHO

Ken Kirschenbaum doesn’t know what day it is.

Literally:

Kirschenbaum has a new newsletter (2020) on the same topic: What’s the current multiple? January 15, 2020 saying:

it’s still around 35 times your RMR provided have proper contracts and you have taken measures to conduct your business to maximize your equity in the contracts.

And then he gives a recent example of 40+:

If I go back 4 months I can tell you that a small to mid-sized deal with all updated Kirschenbaum Contracts ™ fetched 42 times.

He cites multiple deals going for less but blames them on not using his contracts:

In the last 30 days my office closed on 3 alarm transactions. The multiples were 23, 28 and 32. They all shared one common factor: none of the sellers used Kirschenbaum Contracts ™. In two deals many customers didn’t even have written contracts.

What do you think of the state of alarm deals in early 2020?

New Kirschenbaum email where his stance is relatively more optimistic than last year:

In my opinion the multiple hasn't changed over the past many years, it's still 35 times your net RMR. That doesn't mean you're going to get that multiple because you may have done more, or less, than adhere to recommended best practices. If you're done more then perhaps you will get a multiple of 44 or more; if you've done less, perhaps you will hear offers of 18, or less. Big swing in price and that's because not all alarm owners run their business the same way. K&K is presently working on about 10 alarm deals as I write this article. We represent sellers and buyers and sometimes both. I "brokered" a few of the deals, but not most of them. The deals are priced between 32 and 44 times. The price starts at 35 and moves up or down based on the accounts.