I believe that now is a great time for growth by acquisition in the PhySec space. Not just in regards to buying out technologies, but also on the integrator side.
1. There are a number of smaller (sub $5 MIL), owner-operators that are looking for an exit
As many owner-operators are starting to age, and consider retirement, they are looking to sell out their primary asset, the business. Most owner-operators got started without much consideration into the exit strategy, that is, what is the plan to cash out of the business. Because of this, many small operations are poised to be acquired over the next 5-7 years.
2. Increased competition from new entrants, due in part to lower barriers to entry than ever before, is eroding profit margins
With access to PhySec technology being available to anyone with an Amazon account, there are many new, unqualified, entrants into the PhySec space. As a result, competition is increased, lowering profit margins and decreasing market share. Consolidation could be beneficial in combating new competition by decreasing operational costs, leveraging market segment diversity as well as growing geographically. Additionally, this will position the more established companies to 'clean up' after the industry glut dies out.
3. Consolidation will stabilize the market in the long term
There is a lot of volatility currently in the industry, as defined above. Consolidation will bring about stability by reducing the number of players in a given market. While this can be viewed as bad, reducing competition, I would argue that to much competition does not add market value but creates confusion and degrades quality. Consolidation done well, can improve operational efficiencies, increase quality and improve overall market viability in a given region or market.
4. Money is relatively cheap, allowing from greater capitalization on investments
The cost of money is low, currently. There are more and more investors looking into the PhySec space as possible avenues of new investments. While getting access to large sums of money is still difficult, the potential value is growing. While one could make a valid argument that there is a growing bubble, if invested well, there is plenty of upside.
I do believe that there is substantial opportunity over the next 5-7 years for growth by acquisition. The key will be execution.