Should Avigilon Accept A Buyout Offer From Dahua Or Hikvision?

JH
John Honovich
Mar 18, 2017
IPVM

Let's say hypothetically that one of these 2 companies made the top bid for buying out Avigilon.

Should Avigilon take it? Discuss.

Related / Background: Who Will Buy Out Avigilon?

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JH
John Honovich
Mar 18, 2017
IPVM

Some potential concerns - Hikvision's Chinese government ownership could make a deal politically risky. Dahua's organizational issues could be problematic / negative towards existing / retained Avigilon management.

Are those big enough issues? Any other concerns?

I am asking about from the position of Avigilon but if you think Dahua or Hikvision should not buy Avigilon, feel free to comment on that element as well.

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Avatar
Timothy Howell
Mar 27, 2017
IPVMU Certified

I design a lot of security systems for the Feds, if something like that were to happen then Avigilon would drop off my acceptable vendors list...  Security is of paramount importance...

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MM
Michael Miller
Mar 18, 2017

I am going to say NO and NO. 

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UI
Undisclosed Integrator #1
Mar 19, 2017

What would Avigilon bring to either of their tables?

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U
Undisclosed #2
Mar 19, 2017

Is this a serious question?

Or is this more of a "why would Kia ever consider buying Ferrari? After all, that's not their target market."

If it's the latter, then you have a valid point. HIK/Dahua at this point are basically trunk-slammer specials for anybody that can continue recommending them in this environment, whereas Avigilon is one of the biggest names out there right now. 

If it's the former, then I can only shake my head.

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UI
Undisclosed Integrator #1
Mar 19, 2017

It's a serious question. I honestly don't know too much about Avigilon and what they do. 

I work with Hik product and while I understand the security risks, their product line is excellent. So what would Avigilon do for it?

Is Avigilons security stronger? Would they help Hik in this department? 

Hik is already the largest seller in the world so would the extra customer base be at all beneficial?

 

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JI
Jordi Ibero
Mar 21, 2017
Imago IP Solutions

It's just about technology...

OP
Oleh Petrovych
Mar 30, 2017

Quite possible that similar to why chinese carmaker Geely had acquired Volvo from Ford and Lenovo purchased notebooks and later servers business from IBM

U
Undisclosed #3
Mar 19, 2017

In my opinion,

In Eyes of HIK/Dahua (or anybody else) only value Avigilon has

it's source code for ACC and source code for camera firmware with Analytics

Hardware has very little value

 

 

 

 

JH
John Honovich
Mar 19, 2017
IPVM

In Eyes of HIK/Dahua (or anybody else) only value Avigilon has it's source code for ACC and source code for camera firmware with Analytics. Hardware has very little value

Evidently you look at companies only being worthwhile given their technology.

However, sales and marketing organization plus brand are also very valuable. 

Think about how much money Dahua is burning trying to build what Avigilon already has (sales / marketing). Think about the brand problems they have.

You don't think Avigilon would solve that? Do you think Dahua can solve it on its own?

UM
Undisclosed Manufacturer #4
Mar 19, 2017

In my opinion, if this were to happen Hikvision and Dahua would gain in many ways - including gaining additional market share, access to a broader product line, large footprint in North American Markets, etc etc. But Avigilon apart from cashing out would not gain much. It would be very concerning for existing Avigilon employees from the sense of retaining their jobs as well as maintaining their pay scales and style of work. 

But Avigilon apart from cashing out would not gain much. It would be very concerning for existing Avigilon employees from the sense of retaining their jobs as well as maintaining their pay scales and style of work.It will largely depend on terms of the deal how Avigilon will protect their employees and make sure the deal does not harm them.

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UM
Undisclosed Manufacturer #11
Apr 19, 2017

You assume Avigilon gives a crap about its employees. They would take the money and run and leave what few loyal employees they have left to fend for themselves.  

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UM
Undisclosed Manufacturer #5
Mar 19, 2017

There is no hiding from the Chinese connection in today's environment.  To purchase a N. America brand in hopes to gain local access is a fantasy.

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MM
Michael Miller
Mar 19, 2017

I agree.... We would wind up replacing a lot of systems if this happened.

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UI
Undisclosed Integrator #7
Mar 19, 2017

I can't say I would end up replacing a lot of systems here but it would certainly damage the product in my eyes.  In all likelihood I would stop selling the product as my core, go-to product while I search for something that is an adequate replacement.

Dahua would be more acceptable than Hikvision in my opinion but I do not see a good outcome for either.  Hikvision appears to be just plain unscrupulous whereas Dahua appears to just be incompetent.  Incompetence can be solved for but a lack of scruples cannot be overcome.

MM
Michael Miller
Mar 19, 2017

I am not even sure why we are having this conversation as the only place I hear rumors about Avigilon being sold is on this site. 

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JH
John Honovich
Mar 19, 2017
IPVM

the only place I hear rumors about Avigilon being sold is on this site.

Mike, have you ever considered that we have access to a lot more information that other 'places'?

As I said in the other discussion, I am 99% sure (if not higher) that Avigilon buyout negotiations have been conducted over the last few months. As I mentioned, it is always possible that the company decides not to sell but the fact that you do not know about this or have not heard about it speaks to your and others lack of this level of information.

 

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MM
Michael Miller
Mar 19, 2017

I know more than you think I do just not into spreading rumors. 

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JH
John Honovich
Mar 19, 2017
IPVM

I am sure you know lots of people in Avigilon and we know lots of people at Avigilon. And guess what? Those people are being kept in the dark, for good reason.

We have lots of sources across the industry and far more than you. You can choose not to believe it, it does not change the facts.

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MM
Michael Miller
Mar 19, 2017

Who said I was talking about anyone at Avigilon?  Anyway just seems like there are more important things to talk until something happens. 

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JH
John Honovich
Mar 19, 2017
IPVM

Give it a rest, Mike. If this not important to you, don't comment or read about it.

There are a lot of senior people in the industry and people who follow the stock who find this exchange very informative.

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MM
Michael Miller
Mar 20, 2017

Relax Jon.  If anything this is more important to me then it is you.   I am just more into facts and if/when it happens I will read all about it.  Have a good night. 

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JH
John Honovich
Mar 20, 2017
IPVM

I am just more into facts

Mike, I am in possession of far more facts than you about this.

If anything this is more important to me then it is you.

The potential negative or positive ramifications are certainly more for you than me. I just have far more senior industry contacts than you do, ergo more facts. I am not going to disclose specifics but when I do post things like this it means the sources are strong.

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Avatar
Brian Karas
Mar 19, 2017
IPVM

If Hikvision or Dahua were going to purchase Avigilon, they should have done so before their own brands were so 'recognized'.

Avigilon should really be purchased by a private equity company. They already have a diverse product portfolio (but could still fill many gaps), a worldwide reach, and manufacturing capacity. There is a lot of potential, if a few other things can be restructured.

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UM
Undisclosed Manufacturer #5
Mar 19, 2017

Lenel + Avigilon merger would be a mutually beneficial event.

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Tyler Blake
Mar 19, 2017
BCI Integrated Solutions

I'll second the Avigilon + Lenel merger. Makes the most sense here.

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UI
Undisclosed Integrator #7
Mar 19, 2017

I don't agree, simply because Lenel is a trainwreck.  Avigilon offers support for everyone including clients.  Lenel does not.  Avigilon avoids software maintenance agreements.  Lenel does not.

 

Though if the option were Lenel or Hikvision, it has to be Lenel.

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John Booth
Mar 27, 2017

Lenel (UTC) + Avigilon would not work. Lenel is already costly as it is, and since they have a higher cost for everything and nothing ever changes they would do the same with Avigilon. I would rather see AMAG or Genetec purchase Avigilon. 

UM
Undisclosed Manufacturer #4
Mar 19, 2017

While it does make sense at the same time there are too many conflicts here. the question would be who would buy whom naturally this would mean UTC buying Avigilon and not Lenel buying Avigilion or Avigilon buying Lenel, which seems very unlikely as there is very little value Lenel can add to Avigilon in terms of product and technology value considering they already have their own Acces Control product as a result of their acquisition of Red Cloud that is based on Mercury controllers and often competes with Lenel and they are know to take over a lot of Lenel installs. 

The other important aspect here is although Lenel is a proven Access Control Platform but its video surveillance strategy is very complex and weak with integrations from major VMS providers like Milestone, Genetec, etc. Thier own video management offerings include OnGuard Video and Prisim Enterprise Class VMS. The big benefit to Lenel would be Avigilon's products and technology added to their portfolio would make them a much stronger Video Surveillance player 

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U
Undisclosed #2
Mar 19, 2017

I agree that with Avigilon adding Redcloud, it diminishes the overall portfolio value of Avigilon for a company like Lenel, unless there is some technology in Redcloud/ACM that OnGuard doesn't currently have (quite doubtful).

With that said, this would be a pretty shrewd move by Lenel, because it would immediately make them a legitimate and viable player in the video surveillance market. Currently, the ACC integration to OnGuard is very good, and works very well, but is EXTREMELY expensive to implement relative to other options out there. By buying Avigilon and then eliminating those costs to integration, Lenel would have two "best-in-class" products in both the ACS and VMS markets that play well together and create probably the best single platform out there -- at least in terms of the capabilities of each product independently.

The question really becomes whether or not UTC sees enough long-term value to offset the reasonably high cost of Avigilon overall, and whether the overlaps in their product line would be too much 'waste' or inefficiency to try and bring in to their portfolio. I do think that Lenel is going to have to do something fairly "groundbreaking" soon. While I am one of those that believe Lenel still has a really strong place in the market and do a great job at what they do (enterprise-level ACS), there are definitely more players vying for that business these days, and some of them are starting to get to the point where they are serious contenders. When that happens, if Lenel doesn't have a compelling "next step", it's going to be tough to see where they go from there to continue building upon what they already have and continuing to grow.

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UI
Undisclosed Integrator #6
Mar 19, 2017

It's really a shame Avigilon did not merge with RS2 for access control. We sold red cloud and sell Avignon now, but it should really just be scrapped for a mature ACS rather than reinventing the wheel.

I think the problem UTC will have is that they are making good money now rebranding hikvision product as interlogix.. So, why throw good money after bad by investing more heavily in the camera market on the manufacturing side especially at a crazy PE valuation. It is entirely possible that someone completely outside of the industry like a networking / IOT manufacturer will buyout Avigilon (cisco etc.)

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UE
Undisclosed End User #8
Mar 20, 2017

It would bring Hikvision a Casino ready VMS. I for one, would love it! Their cameras are already very good and having a good VMS would make them a real player in the Casino market.

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UI
Undisclosed Integrator #7
Mar 21, 2017

This would be the single biggest corporate culture clash ever.  Hikvision/Dahua push low cost boxes any which way they can: OEM, direct sales, distribution, Amazon, etc.  Avigilon sells direct to selected, pre-qualified dealers and detests distribution.  All of them are setup to support their chosen model which directly clashes with the other.

No matter who were to purchase whom I could see a flood of personnel jumping ship.

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JH
John Honovich
Mar 21, 2017
IPVM

No matter who were to purchase whom I could see a flood of personnel jumping ship.

To where? It does not strike me that there are a lot of great, high paying video surveillance jobs out there right now (Avigilon pays well and is one of the top manufacturers).

I do agree with your general / fundamental point of culture clash but you might see quite a lot stay though with serious concerns about fit / performance.

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UI
Undisclosed Integrator #7
Mar 21, 2017

To where? It does not strike me that there are a lot of great, high paying video surveillance jobs out there right now (Avigilon pays well and is one of the top manufacturers).

Money is not everything.  If it were I would be sporting a Hikvision logo on my shirt right now and Skyping with my overseas boss at 3AM.

 

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UM
Undisclosed Manufacturer #10
Mar 21, 2017

I heard of several AVIGILON Sales guys who have 'jumped ship' and joined Hikvision in the UK based on the financial package they were offered. I do however believe that these packages were based on sky high targets.

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UM
Undisclosed Manufacturer #10
Mar 21, 2017

AVIGILON sells predominantly through distribution outside the US so the 'detests distribution' comment doesn't really fly. I also cannot see an AVIGILON-Dahua or Hikvision marriage though.

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JH
John Honovich
Mar 21, 2017
IPVM

AVIGILON sells predominantly through distribution outside the US so the 'detests distribution' comment doesn't really fly.

Point of information, 63% of Avigilon's 2016 revenue was from North America where they are dealer only so that is likely the basis of #7's comment.

UM
Undisclosed Manufacturer #9
Mar 21, 2017

I'd rather see Avigilon get picked up by Hanwha, but I'm a Hanwha fanboy.

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U
Undisclosed #12
Apr 22, 2017
IPVMU Certified

...I'm a Hanwha fanboy.

a converted Samsung Man?

Avatar
Matthew Netardus
Mar 27, 2017
IPVMU Certified

If Avigilon starts to get hit with slowing sales numbers I wouldn't be surprised to see them grab an easy way out, but I don't see that happening for a few years. With HIKVision starting to build out their expansive engineering team and the new huge facility I think it would be a mistake for them to try any large acquisitions until those new aspects are integrated in fully to their existing team (maybe a small acquisition here or there to fill in technology gaps as they build out their VMS, but nothing close to the size of an Avigilon deal). 

Not to say that they won't, they do have an endless printing press of money so they may see it as a free gamble, but to this point they've seen smart with acquisitions and buying Avigilon seems too desperate for them right now

JH
John Honovich
Mar 27, 2017
IPVM

If Avigilon starts to get hit with slowing sales numbers I wouldn't be surprised to see them grab an easy way out, but I don't see that happening for a few years.

As a point of fact, Avigilon sales numbers slowed throughout 2015 and 2016 (e.g., Avigilon Stock Plunges On Bad Financials (Q2 2016). It's only in the last 2 quarters, that Avigilon has bumped somewhat back up. And there is a fair reason to believe, this is part of optimizing the company for sale (e.g., considering Q4 2016's cuts in spending / hiring). 

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UM
Undisclosed Manufacturer #11
Apr 19, 2017

Matthew

Your points are right on, except that Avigilons upper management are inept. 

No one under Alex has ever been in the level of position they are in now. They are in so far over their heads they need a way out. The best option would be to fire the COO and VP of Sales and bring in professional management. But the egos will never let that happen. 

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U
Undisclosed #12
Apr 22, 2017
IPVMU Certified

The best option would be to fire the COO...

A recommendation that John himself made,

But the egos will never let that happen.

right before it did happen, almost 2 years ago.

 

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JH
John Honovich
Apr 22, 2017
IPVM

Update: China M&A of international companies was down 77% in Q1, from a volume of ~$91 billion USD in Q1 2016 to ~$21 billion USD in Q1 2017.

As the Chinese government's own publication cited:

Noting an "irrational tendency" in outbound investment, Chinese authorities have set stricter rules and advised companies to make their investment decisions more carefully.

While it is certainly possible for Dahua or Hikvision to do an acquisition, it will be harder to get it approved this year than last.

 

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Avatar
Brad Peterson
Apr 22, 2017

Chinese government is all I need to make a decision. My $ won't go that direction.

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UM
Undisclosed Manufacturer #13
May 10, 2017

Hanwha should buy Avigilon for the software, analytics and customer base.

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EP
Eddie Perry
May 11, 2017

meh but you arent counting all the baggage that comes with it though. especially since Hanwha just dropped some serious cash to roll their own software and analytics.

I think they will will get the customer base with or without buying Avigilon out eventually though IMHO

MM
Michael Miller
May 11, 2017

What software is that?

 

EP
Eddie Perry
May 11, 2017

All I can say right now is that Hanwha has the cash on hand to buy a VMS or Roll their own. Hanwha wants to roll out their own VMS out by late this year.

Realistically I think they Should buy one out and integrate and revamp it. But all the good ones have been bought out. save one or two i can think of and they are not going to go cheap. Avigilon is one of those two.

Hanwha is past the point where they have to prove themselves since leaving Samsung. we have waited to see what would happen when "Hanwha" would have to release "their" Products and ideas on the future of "wisenet" Then they released the Q,P,and X series lines. the Q,P, and X series are more than I honestly expected would be released, let alone Moving SoC factories back to Korea. Yes they totally kinda have handled the "hand off/Name change" from Samsung to Hanwha kinda poorly, but They have a great direction and organization to be a leader in surveillance camera equipment where most of the old big names are starting to die out.

What I can say is only half of the P and X series have been released and while the X-series analytics are really great I don't see them flourishing with out a solid VMS to go with them, and nothing is going to make that better than one they own or are partnered with/bought.

UM
Undisclosed Manufacturer #11
May 10, 2017

They should accept any reasonable buyout offer, if only to get different leadership and a strategy to move forward other than just 'sell more'. 

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UI
Undisclosed Integrator #7
May 10, 2017

They should accept any reasonable buyout offer, if only to get different leadership and a strategy to move forward other than just 'sell more'.

I believe that strategy has changed as of the last investor meeting, at least outwardly.

If they were purchased by Hikvision or Dahua, do you think their goal would shift from 'sell more'?

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