Who Will Buy Out Avigilon?

The level of credible chatter about an Avigilon buyout has reached a new high. There certainly appears to be negotiations happening.

Related: So far, Avigilon is the top choice in our $500 betting pool.

Can a deal be reached? Who will pull it off?

[March 2017 update: Credible information continues to point to an Avigilon acquisition negotiation in progress.]

 


Hikvison I called it first and will spam post unholy amounts of epic memes after its done.

This would be hilarious since we work at a shop that sells both hik and avigilon and our Avigilon rep has nothing but god awful things to say about Hik. Meanwhile the HIK RSM's are the first ones to say when a project exceeds their VMS and strongly recommend Exacq or Avigion they even complement the other manufacturers including Arecont where their multi-imager beats theirs.  It could help that our Hik reps are former reps of distribution and manufacturers and I think people in this industry long enough realize it's all a revolving door.

If that happens I need another VMS provider.

I hear Hikagilonvision is pretty good.

John - what is this based on?  Is it just chatter in the betting pool thread?

No, not from the thread. This is from numerous unrelated senior industry people.

I put it at 99% that Avigilon is seriously evaluating offers. Doesn't mean they are going to do a deal of course. Arecont's been considering offers for many years yet never consummated a deal.

I also don't mean this as a negative to Avigilon. At some level, the company has a fiduciary responsibility to consider the best option for shareholders. Avigilon is an attractive company, especially at their stock price relative to other acquisitions in the industry.

"I put it at 99% that Avigilon is seriously evaluating offers."

Yikes!  I see few good options:

If it's Panasonic, Cisco, Bosch, Lenel, or Pelco I could see a shift to overpriced client licenses, the focus on selling boxes, buggy/poorly documented software releases, non-existent support, and a push for maintenance agreements.  The VMS would disappear and become an NVR.  Not sure Pelco has the capital.

If it's Hikvision I am pretty sure I will have to pick up my cameras from an Amazon box outside my office door and compete against Joe Trunkslammer.  This does seem most likely as it gives them a reasonable beach-head in increasingly isolationist America.

If it's Tyco... why?

If it's Canon that would be amazing but incredibly unlikely.

If it's Dahua we may not even know Dahua bought them due to a poorly translated press release.  Product will also show up on Amazon and Alibaba.  

If it's Flir... might be interesting.

If it's Samsung (not Hanwha) looking to get back into the industry I would question the timing.

If it's Hanwha... I don't know enough about them to be concerned.

Who else has the capital?  Could it be a non-manufacturer? 

If it's Canon that would be amazing but incredibly unlikely.

Agent: "Acquisition integration support, how may I help you today?"

Canon Exec: "Yes, I purchased a leading VMS mfr and a leading camera mfr from your Scandinavian line, but I having no luck getting them to integrate, I'm on-site now and need to get this going, help!"

Agent: "I'm showing that the warranty on the VMS company you purchased is expired, you will need to bring that current first.  Alternatively, I can offer you an upgrade to a newer model; we are now offering an all-in-one solution company in Northern North America, 500M/yr run-rate, plug and play management, comes with own building..."

Canon Exec: "Waive the restocking fee and its a deal!"

 

My vote is Hanwha.  I've heard a lot of chatter inside the organization from people who would know that supports it as well.

My vote is Hanwha

I've heard that too.

But buying Avigilon is going to take $750+ million USD. Is Hanwha willing to make that commitment?

Is Hikvision willing to spend that to deny Hanwha and others from getting Avigilon?

That said, I do think Avigilon would be a good move for Hanwha, solves the branding issue, gives them strong end to end solution, etc.

They're a $55b company which is currently in a growth phase.  $750m is a lot, but it might still be realistic.  Someone is going to buy it, anyone with deep pockets has to be seriously considering it.

They're a $55b company which is currently in a growth phase. $750m is a lot, but it might still be realistic.

That's Hanwha total. 

Hanwha Techwin is ~$2.3 billion USD (source). And a lot of Hanwha Techwin is selling missiles and tanks, not surveillance cameras.

Yes, Hanwha overall can easily buy Avigilon. But Hanwha's current business in video surveillance is ~1% of its overall revenue so a ~$750 million investment would be a big deal. Possible, for sure, just would be big.

 

True but who would of anticipated Canon (almost a non-player in IP surveillance) buying Milestone and Axis?

#2, like I said, it is possible and I think it would be a good fit but Canon buying Milestone and Axis is more of the exception than the rule when it comes to big money buyouts of surveillance manufacturers.

Hmmm, all good guesses.  I'll go out on a limb and say Schneider Electric.  No particular reason. (It's a running gag of mine in this office)

I know it may sound crazy, but it would not be of a surprise if Stanley acquired them. This is not based on a wild guess.

Another company with a great record of acquisitions...

oy vey.

Would this sale include their access control product line?

Typically, acquisitions include all product lines. 

If an acquirer already had a strong access control line, what would make most sense would be to phase out Avigilon's over a few year period and transition the Avigilon access control systems into the acquirer's.

Since access control is such a small part of Avigilon's business, it would not make much of a material difference.

Dare I suggest Siemens? Maybe a tit for tat / shot across the bow play- with regard to JCI?

My guess would be UTC (Lenel) as their camera line and VMS are not up to par, and it would impact their business in a truly positive way...and hopefully, they wouldn't kill it over time.

Agreed

Hikvision buying out Avigilon makes little sense to me. Avigilon would instantly become hated brand #2, behind Hikvision. Avigilon would ALSO become owned by the Dark Side Chinese gov. What would Hikvision gain? They wouldn't get re-listed on GSA. Their shiny new toy would get the boot from the same list, no?

They wouldn't get re-listed on GSA. Their shiny new toy would get the boot from the same list, no?

I think Hikvision would not only get re-listed but become eligible for America made buying preferences. After all, Avigilon has a Texas factory and that is what the requirements are typically based on.

While I don't think Dahua would buy Avigilon (because Dahua is dysfunctional, etc.), I think it would be a great move for Dahua since their US operations are so early / limited.

By contrast, Hikvision already has a a fairly strong NA operations which would be redundant with Avigilon's. On the other hand, if Hikvision has the money, still could be a strong way to get into the higher end of the market.

So wouldn't it be easier and less costly for Hikvision to simply open a "factory" in the US to meet the same standard, vs spending $750M?

Certainly, but I don't think that does anything for their reputation.  Avigilon brings a certain amount of legitimacy to the table with regard to the higher end of the market.

I just don't think that shine will permeate through the dark fog surrounding the name Hikvision that is so thick these days. I do see your point, but I just think that it would quickly turn from a boost to their brand to negative spin about shareholders.

As a bonus, John could lambast* both Hikvision and Avigilon in one fell swoop.

 

 

*Or take money from, as some think, depending on perspective (LOL)

I also don't think Dahua is going to buy them right now as they seem to be spending all their money on hiring people, instead of looking into acquisitions.

You're right- Avigilon gains nothing with a Hik purchase, but Hikvision is instantly legitimized as an enterprise class player.  So much so, they might now catch the eye of those who've previous shunned them as a solution- the financial vertical comes to mind. 

Avigilon would instantly become hated brand #2...

down from #1?

In the integrator favorability rankings (we are in the process of publishing), Avigilon is in 5th, Hikvision is 15th so there is a lot more integrator goodwill for Avigilon.

...so there is a lot more integrator goodwill for Avigilon.

 I believe it.  

Theoretically though, couldn't a manufacturer rank #1 in both goodwill and #1 in 'badwill', since you track each independently?

 

couldn't a manufacturer rank #1 in both goodwill and #1 in 'badwill', since you track each independently?

No, not practically though it warrants a discussion on the nuances involved.

Theoretically, the 'best' way to do that would be to go 50 positive / 0 neutral / 50 negative. That would make the net 0 but with very high positive and negatives.

However, since both Axis and ONVIF scored over 50 positive, that still would not be enough to be #1 in positive score.

Hikvision was an interesting case, though; Their positive ranking was 8th but their net ranking was #15 dragged down by their #2 ranking on negative (thanks Arecont).

However, since both Axis and ONVIF scored over 50 positive, that still would not be enough to be #1 in positive score.

True, though if Avigilon did achieve the polarizing 50/50 good/bad split, it would be the #1 negative score, I believe.

f Avigilon did achieve the polarizing 50/50 good/bad split, it would be the #1 negative score

That's a highly misleading question / supposition since Avigilon had a fairly low negative score of just 15%.

Contrasted to Hikvision below:

That's a highly misleading question / supposition...

Not intentionally misleading, as I didn't have the data on Avigilon that you have.

Is it fair to say that Avigilon is the #1 in the neutral category?

Is it fair to say that Avigilon is the #1 in the neutral category?

No, Avigilon is not the highest nor the lowest in neutral.

Hikvision had the lowest neutral at 18% while many manufacturers got 60% or even higher neutrals.

Neutrals tended to be correlated with companies that were not widely used and did not market much.

Not that I actually know anything about this, but I'd put my money on either UTC or Honeywell, and Pelco coming in a distant 3rd.  Both of these large brands have a lot to gain from such an acquisition, as they have large customer bases and neither has a decent video product, so it seems as though it would be perfect.

Just my 2 cents...

What about SoftBank Security Services? After meeting with Trump after the election SoftBank's CEO pledged a massive $50B investment initiative in the US.

Avigilon is a Canadian company but with a manufacturing plant in the US it may be an attractive SoftBank target...

Kamen

 

I'll put my money on Hanwha buying OnSSI for a song before buying Avigilon.  Convergint's equity partner's are on a buying spree, that could be interesting but also unlikely.  I'll agree with Rian and say UTC or Honeywell, but I hope it is a company from outside the industry.

I'll put my money on Hanwha buying OnSSI for a song before buying Avigilon.

That's an interesting suggestion.

OnSSI would certainly be the value play, like a ~1/10th of what Avigilon likely wants and would be a more surgical add (just VMS, no camera overlap, etc.).

That's the big decision for anyone considering buying Avigilon, there are many other 'parts' the company could be independently for far less, though certainly Avigilon has its own value / strength both for the 'solution' and potentially for the patents.

There is a good point in your post that I think some are missing.  Beyond just cameras, VMS, and a middling access control product Avigilon brings with it a very valuable patent portfolio.  Right now nearly every major manufacturer is paying royalties on analytics.

Right now nearly every major manufacturer is paying royalties on analytics.

Yet neither Hanwha nor ONSSI do...

How do you know that Hanwha and ONSSI aren't paying royalties for analytics?  Do they have the development in house?

i believe Bosch has its own analytics. That noted, there is always a cost whether it's in house development or paying royalties for someone else's development. 

How do you know that Hanwha and ONSSI aren't paying royalties for analytics? Do they have the development in house?

To be clear, what one pays to Avigilon for patent royalties does NOT cover software development.

When you license Avigilon patents it is for the concepts / methodology behind the analytics, not code / software. So even if you develop all your own code, you may have (or want to) license Avigilon's patents to avoid being sued.

To be clear, what one pays to Avigilon for patent royalties does NOT cover software development.

Thats a good point.  Perhaps Avigilon should consider putting together an SDK with some of their analytics included, for an added fee.

It could make the licensing of the patents more palatable.

John, at first I was going to disagree with you. However, I was thinking of licensing royalties, which are typically directly related to development costs. That noted, even audited financials won't tell you for sure whether revenue from one royalty versus another funds development.

That noted, when someone another manufacturer licenses Avigilon's software to be used in their product, even if it's an SDK/API, it is not a patent license. This is what I thought was the typical OEM model. Isn't that the case when a manufacturer/owner of analytic software licenses software to another manufacturer? Among other things, this allows for scalable costing and pricing.

That noted, when someone another manufacturer licenses Avigilon's software to be used in their product, even if it's an SDK/API, it is not a patent license.

I'm not sure they offer their software to be used by other manufacturers.

The only material benefit to the Avigilon licensing program is that they promise not to sue you for using your own analytics.

 

 

How do you know that Hanwha and ONSSI aren't paying royalties for analytics? 

With Samsung, mainly because of this:

Samsung Slaps ObjectVideo

With ONSSI, because they were not targeted, AFAIK, by ObjectVideo or any of the other analytic trolls non-practicing-entities.  Nor have I heard that they use anyone else's.  Also, last time I checked their VA was very rudimentary.  And they do have a programming staff.

So why do you think they do?

Doubt that any Chinese company will buy out Avigilon. Their model is to attain intellectual assets via Cyber exploitation not appropriation. 

Flir is in acquisition mode, they have been for a few years now and an Avigilon acquisition would give them what they didn't get with the DVTel deal, a growing customer base and quality, high MP cameras. Latitude is good but does not appeal to the masses like ACC.

It would also allow them to end the Analytics debate... Rialto vs FC-ID...

My $0.02

 

 

Has anyone mentioned Honeywell buying Avigilon? One would think they would see value in swallowing up the Avigilon dealer network and increase their sales thru ADI.

I'd bet on a very large defense contractor (Top 25 worldwide), that would want to complement a recent, very large acquisition in cyber-security. 

Are you offering odds on the other side of this? I would bet handily against that happening. :)

Sure, first identify yourself, like I did. ;-)

Here is a guess of who will be the purchaser of Avigilon...AMAG / G4S. Their SMS uses Sailient as its integrated video management system. Sailent, in my opinion, is way over-leveraged as a national (much less international) manufacturer. Isn't it more of a mom-and-pop organization, which is extremely unstable given the investment under AMAG's market?

In any event, the downside for an AMAG / G4S purchase is that the industry would lose an independent camera and VMSmanufacturer.

Is there a $500 reward for guessing the purchaser?

Update: Credible information continues to point to an Avigilon acquisition negotiation in progress.

<is gleefully awaiting to find out who the buyer is

<is gleefully awaiting to find out who the buyer is

< Is not.

Keep an eye on GE they have the money and may want the patents and  analytics and push the development into the manufacturing and distribution applications. I see a big opportunity for a non security player  to pay for the acquisition with traditional security sales and to move into the next big market of video/ enabled business applications.

John Paul, interesting suggestion on GE. They have been out of security long enough and don't have any conflicting existing parts that it could make a clean fit.

Honeywell?  Or will they (Honeywell) buy ONSSI?