ADT Acquires Much Maligned "Defenders"

By John Honovich, Published Jan 07, 2020, 02:47pm EST (Info+)

"The Defenders" has the dubious distinction of being ADT's largest partner and a long history of customer and employee complaints and lawsuits.

Now, ADT has acquired "The Defenders".

What does this mean for ADT? Is it a good deal? And what does it say about the alarm industry overall? We examine this inside.

Acquisition ********

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Upside *** ***

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Comments (10)

John Honovich

IPVM | 01/07/20 08:33pm

ADT has posted a new 8K government filing with some more details, including:

  • It is being termed officially as a 'merger', contrary to the press release which called it an acquisition
  • The Defenders will "become a wholly-owned indirect subsidiary of ADT, "not integrated in, per this statement.
  • "Defenders’ shareholders have agreed not to sell any Common Stock received in the Merger for a period of 270 days from closing". This exposes some risk to them, ADT stock is at ~$7.50 today but it's low less than 6 months ago was $4.35

Also, there is an investor's presentation about the deal, one notable point was ADT's claim that 'significant equity consideration demonstrates seller's confidence in upside potential of ADT shares'. However, there is no discussion of earnout or other incentives and given how 'opportunistic' this deal is, it is possible that this was The Defenders best choice. ADT's stock is volatile. In 9 months, it could be at $12 but it could go back to $4 something.

One other interesting point from the investor's deck is that ADT reports The Defender's spends $175 million annually on advertising:

That's quite a lot of money especially since traditional industry participants bemoan SimpliSafe's advertising spend.

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John Honovich

IPVM | In reply to John Honovich | 01/08/20 03:14am

Related to the $175 million in advertising costs, ADT also says Defenders get 1.5 million customer inquiries per year:

Does anyone know where most of The Defender's ad spending is going? $175 million is a lot of money.

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Undisclosed Manufacturer #1

In reply to John Honovich | 01/08/20 10:43pm

Does anyone know where most of The Defender's ad spending is going? $175 million is a lot of money.

Probably to the Better Business Bureau? You'll recall this video. I do wonder if ADT saw this story, and their stock price continues to trend downward.

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John Honovich

IPVM | In reply to Undisclosed Manufacturer #1 | 01/08/20 10:48pm

ADT surely knows far more about The Defender’s issues than we do!

As for the stock, it’s up substantially since their low last summer.

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John Honovich

IPVM | In reply to John Honovich | 01/08/20 10:51pm

However, to #1’s point, ADT stock is down nearly 10% today. Anyone see any specific driver for that? A momentary Google search showed no immediate explanations.

This deal has been public since Monday night so I don’t think this is a factor, else the price would have dropped yesterday but it held steady then.

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Larry Tracy

01/10/20 10:46am

Traditional residential market is getting hammered by DIY companies. Major suppliers are seeing drastic loss of equipment sales. Vivant value has dropped drastically.

Maybe ADT will use the Defender Organization to push the commercial market.

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John Honovich

IPVM | In reply to Larry Tracy | 01/10/20 05:14pm

Maybe ADT will use the Defender Organization to push the commercial market.

Larry, are you joking? I don't know but it seems the types of marketing and tactics The Defenders use would be tougher to work on businesses?

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Larry Tracy

In reply to John Honovich | 01/25/20 11:36pm

I did say "maybe", they certainly could modify their tactics, but having the sheer number of sales guys they do, just making more sales calls on small business has to close business. They are pushing commercial in my home market.

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John Honovich

IPVM | 01/25/20 10:38pm

A few weeks later, ADT stock is down 13% and so, by definition, is The Defender's purchase price. The Defender's founders cannot liquidate for some months but will be interesting to see where it ends up for them.

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Undisclosed Manufacturer #1

01/26/20 09:38pm

Two weeks ago analysts had ADT listed as "bullish" and now it's a "neutral" rating. Ironically the long-term sentiment (12 months) was very strong and now it's listed as weak. Hope it improves.

I follow the consumer side more closely as I believe the same dynamics disrupting their security market will eventually disrupt the commercial market. In fact, it's happening now, just most vendors or channels are not awoken to it yet.

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