ACRE Acquires RS2, Explains Acquisition Strategy

General questions: Is access control more significantly fragmented than video? I am not sure but it seems that way. And is access control, in the next decade, going to get significantly less fragmented?

ACRE's track record doing these things is strong so I am not so much questioning that but wondering when (if ever) does the access control market move beyond having regional access control manufacturers.

Is ACRE going to buy Matrix Systems next so they have one in Ohio? I am kidding, I think.

Hopefully this is a good move. RS2 is an outstanding company. I have been a dealer for them in the past and RS2 was one of the best companies I have ever had to deal with, both pre and post sales. They have a longevity among employees as well and have been growing the past few years. 

I'm positive on both this move and the Open Options move.  We are Open Options dealers, not RS2, but I do know a couple of folks there on the sales side.  I believe that both companies have a very loyal following due to their responsiveness and the ease of doing business with both.

I'm a firm believer that smaller private companies (compared to large, publicly-traded companies) can and consistently do move quicker and have better relationships with their customers as a result.

I recently chatted with Joe Grillo at the Open Options partner event at ISC West, and he mentioned that the longevity there really stood out to him.  For a 20-year old company to have a high percentage of employees that have over 10 years with the company is pretty impressive.  I would expect the same at RS2.

Corporate play buying up your smaller competitors before your larger competitors do.  Bankroll their growth, build them up, then sell them at a high premium to a camera or VMS manufacturer who wants access control. 

I think this is the interesting world that Mercury hardware gets us.  It's far easier to spec and install Open Options or RS2 (or any number of smaller players) because they use Mercury boards.  If they go out of business, it's not that big a deal because you now don't have to forklift out the entire system, you just need to change the head end.  That bit of insurance goes a long way to making those companies viable IMHO.  It would be much tougher if they used propitiatory hardware.

Joe's strategy is finally starting to make sense.  It was always inscrutable, which I am sure, knowing Joe, was his intention.  Owning Mercury tied his hands in owning both a hardware manufacturer and several software companies.  Dropping Mercury for a nice profit (assumed) now gives him the freedom from conflict of interest.

As to keeping each company as a standalone, merging several distinct cultures is always a dangerous gamble, as I inherited in managing both WSE (Schlage Electronics) and Northern Computers, while President of Honeywell Access.  Diametrically opposed cultures, markets, and product lines.  Not by wisdom, but by necessity, I left them separate, and managed the narrow overlap.  It worked better than trying to have one overrun the other.

Joe's dilemma will be to grow all the businesses, since none are major players.  Do they compete for his mind-share until one outshines the other, gladiators to the death?  Or do they combine engineering resources and develop a similar code base with different look and feels?

The old Pittway was successful in fire alarms, buying Notifier, Firelite, Silent Knight, and System Sensor, and keeping every brand alive and growing.  More market shelf space, like 7 versions of Coca Cola.  So there is history of separate but equal working successfully.

Joe's challenge is to make all the acquisitions feel equal , or at least having a shot at his limited capital resources to grow.  Since all of his acquisitions ARE regionally diverse, this will be an interesting strategy to watch unfold.

I wish him best of luck and glad to see a mid-size holding company do acquisitions correctly.