Avigilon Acquires VideoIQ

Author: John Honovich, Published on Dec 31, 2013

Avigilon has acquired video analytics developer VideoIQ, just like we predicted.

At the end of 2013, Avigilon raised $69 million 'for potential strategic acquisitions.' At that time, we observed:

"Analytics is the most sensible target [for acquisition]. They do not have any analytics of their own (specifically intrusion/tripwire) plus analytics are more important to larger enterprise accounts (with more cameras and more critical security concerns) and they are still poised to be a next big growth area (certainly with megapixel decelerating as the market becomes more saturated).

VideoIQ makes the most sense to us. They have a strong track record, works well (not a small achievement for analytics) plus they have extensive experience in edge storage (another important area that Avigilon lacks). VideoIQ seems to be doing reasonably well (for the weak analytics market) but they have been around for a long time, and VCs generally want an exit sooner rather than later."

The most surprising part is how little Avigilon is paying - just $32 million in cash compared to the estimated $11 million in revenue. This would be a modest, sub 3x, premium compared to the 7x valuation that Avigilon paid for access control provider RedCloud, a far less established company.

We think this is a strong move, at a good price, both because it adds a quality product and potentially restricts access / integration to rivals.

Avigilon's Partner FAQ on the acquisition contains some additional details:

  • Avigilon says VideoIQ "enables end-users to prevent crime proactively" which is typical Avigilon mis-marketing - it's nearly BRS Labs style. Nonetheless, VideoIQ is strong at detecting crime in real time.
  • "VideoIQ’s technology and business structure will eventually be transitioned to an Avigilon product to provide one single, end-to-end solution for our customers and partners." In other words, in the not too near future, you will need to be an Avigilon partner to get VideoIQ products, a very big deal for non Avigilon dealers / customers.

On the other hand, this is not a bullish sign for existing video analytic companies. VideoIQ was arguably the most successful analytics company and yet was only acquired for $32 million, compared to the tens of millions they raised over the past decade.

For more analysis, see: A Postmortem of VideoIQ and the Future of Video Analytics

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Comments (37)

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I'm going to miss BRKs posts on IPVM.... :(

Yes, no Avigilon employee is allowed to speak with IPVM....

But look on the bright side, this most certainly means you will be passing him on the comment leaderboard shortly:

Perhaps Mr. Kara$ is busy cashing out, he was only a hop away from the C-circle after all.

In any case I would expect some as savvy as BRK to have negotiated an IPVM exclusion from the dreaded Aviglon Posting Moratorium in his non-compete agreement(hint hint), priorities being priorities and all.

Well, he's unlikely to be cashing out that large, simply because the acquisition price was not that high. Let's say he personally got 1% (which I think is way too high), that's $320,000, which would be nice, but not huge.

Almost all of that cash is going to investors, especially because of the amount of previous investment and the typical use of liquidation preferences that favors the VCs.

I am sure he's doing well and in no need of a collection, but he's unlikely to be transformed into "CA$H Money Kara$" because of this.

In any event I would like to be the first to congratulate him on his upsizing and also ask him to explain why he and his company recommend densities of .032 nvrs / per camera. ;)

"I'm going to miss BRKs posts on IPVM.... :("

I predict a slight increase in IPVM's anonymous posts.

Sadly, its been almost two weeks since the 'acquisition' and still BK's all-time number refuses to budge from its lofty yet vulnerable perch of 358...

More than once I have been drawn to a flurry of comment activity as ravenous posters skillfully dissect the 'fatted' manufacturer, integrator, distributor or sacred cow du jour, expecing to see K artfully executing the coup de grace, but when the dust settles seeing nothing but knives and blood... and shadows...

Where for art thou, Karas?

Hold on, let me get my popcorn and a beer...

Hey, why no poll on whether or not this is a good thing for VideoIQ? [IPVM Response - Added]

Let's hope that this is as good a move for the VideoIQ product line as it is for Avigilon...

It's about time. Can't wait to see how tightly the analytics are integrated into the management side. That still leaves 39 million for another (few) acquisition(s).

They might consider buying or producing their own alarm panel. That would cover all 3 major aspects of security (video, access and alarm) and maybe finally bring the alarm panel world out of the prehistoric era.

The industry is truly shaping to be a two camp world, the end to end solution, Avigilon, or the best of breed solution, Milestone, Genetec etc. exacq will leave us soon folding into the Tyco world leaving us with less choice going forward. 3rd party companies will depart from Avigilon faster I think and look for better partners such as Milestone to counteract the Avigilon story.

These are just thoughts of mine.

Interesting observation. I do think there is still a lot of diversity within the overall surveillance market (dozens of significant players, hundreds of non trivial suppliers, etc.). That said, I agree with your sentiment that the 'open' providers are going to need to get serious about how to counteract the growing strength of the Avigilon offering. To date, they have let Avigilon eat their lunch.

Great product addition for Avigilon and great move for Video IQ. Video IQ has some great sales people but they will certainly benefit from the outstanding service provided by Avigilons Service Department.

Amazingly nobody picked VideoIQ in the IPVM "Who's going to be Acquired Next" $500 pool.

Wow, you're right! That's amazing. We had 50+ entries and no one got it.

Now, in fairness to me, I did predict this publicly 2 months. Do I get the $500? :)

Did you get your own pick in before you closed the voting? ;-P

It was your $500 to begin with, take Mrs. H out for a nice dinner and call it even as none of us got it...

Would it be fair to say that best of breed shouldn't necessarily exclude end-to-end, judging by the acquisitions Avigilon has made recently?

No product is perfect and the true test will probably be how well they manage to integrate the various components, as this is usually the biggest challenge, wether you look at if from the provider's or the client's side - true of anything IT related which video surveillance seems to be leaning more and more towards - while continuing to perform the way they have in recent years.

Alain, good point.

It's certainly possible for an end to end solution to simultaneously offer the best products in each category. The challenge is that it is really hard to do and I cannot think of any surveillance manufacturer who has been able to pull it off.

Staying at the leading edge of development for cameras, VMS, analytics and access control is a daunting proposition for anyone. It also tends to be undermined by end to end company's efforts to push their own offerings to their somewhat 'captured' channel.

Avilgion has grown at an unprecedented rate for its size in this industry so it is certainly possible they break ground here, but it is still going heavily against the odds.

I think there is a real chance that Avigilon leverages its hot streak to sell themselves in the next year, which would be quite the culmination of this run, especially compared to the increasing difficulty of managing such a large and complex organization already valued at such a premium.

Hi John,

As you say, staying at the leading edge is another huge challenge for any business and that's compounded by the number of pieces you need to worry about keeping relevant, particularly when they're all interlinked.

As for selling themselves, Alex Fernandes has already gone the build-and-sell route in the past so that obviously has to be in the back of everybody's mind with regards to Avigilon. The kicker will be whether any one competitor will see Avigilon as a big enough threat at this point and/or how compelling they manage to make their offering for one of them to want to go that route within the next year.

I guess we'll have wait and see. :)

Happy New Year!

Alain, what will be interesting about any acquisition of Avigilon is who is willing to pay the price. Their market cap is now about $1.3 billion USD, which is massive for the surveillance industry. Plus, obviously, anyone who wants to acquire them will have to pay a premium on that - so you are looking at an acquisition price approaching $2 billion!

My feel is that it would be an outsider as (1) most incumbents either can't afford or won't pay such a premium price and (2) Avigilon is generating a lot of buzz for outsiders who might want to get into surveillance (and have deep pockets).

Best of breed should be about getting the best products and putting them together so they work seemlessly. in addition it should be about choice and if one piece fails to measure up or ceases to be best of breed then it can be replaced with something else and the whole system continues forward. I agree that this is not always true in our business, but in the avigilon world they do not want this at all. they want you to lock into their solution and nothing else, you cannot take their software out for example and continue forward with their cameras as you can with Milestone talking to Axis for example. Take Milestone out and replace with Genetec, or Exacq etc and everything goes forward without issue.

Well to be fair to Avigilon, that it is not entirely correct. Avigilon has a line of H.264 Cameras that are ONVIF compliant and they can be used with other third party platforms...

ONVIF, ya that is the way to go......not!

Integration needs to be real via a native driver for proper comparisons. when talking about best of breed and comparing to end to end, real integration is the only way to make proper comparisons.

Well, we both seem agree that the biggest problem is to get various products to work together seemlessly.

The other part of the equation, at least from a client perspective, is wether the cost/quality trade off, both in the short and long term, is worthwhile or not and that's usually very subjective, considering that integration costs are typically much more difficult to assess properly - and usually much more volatile - relative to hardware and software costs.

No one said it was the way to go and I dont certainly think it is.

However, if this is an open and honest forum which I think John and his team do a very good job of bringing forth. Then let's be fair make accurate statements.

Happy New Year!

Shannon, Alain, undisclosed, thanks and a little more clarification here.

Undisclosed said, "you cannot take their software out for example and continue forward with their cameras." As a responder noted, Avigilon does have H.264 lines and those support ONVIF (1.x) which can be used (somewhat) with 3rd party VMSes. However if someone is using Avigilon PRO cameras, you cannot switch them to 3rd party VMSes as those cameras are proprietary.

One other note about ONVIF and Avigilon. Part of the issue is that Avigilon only supports ONVIF 1.x, which has major limitations (current is 2.4). Until they resolve this, full 3rd party support including motion detection and PTZ controls will be significant issues. This was discussed here: Sabotage? Avigilon VMS Problems W/ Third Party Cameras

I don't think the "prevent crime" quote is entirely off. I've seen it prevent theft (but only after tresspassing was already in progress). Obviously their statement over simplifies reality, but it does not rise to the level of some of their previous claims.

James, some context for others. That scenario is based on real time monitoring, immediate response, talk down and the hope that it scares off crimes in progress. Otherwise, one is still left to call responders (police, security guards) to intercept / apprehend.

Avigilon is no different than Tyco or Verint - they want to sell the end to end solution which is just another way to say the customer is locked into their proprietary products.

I wonder what (if any) hardware redesign will happen as a result? Will the product builds change at all?

Merging Avigilon's offerings and devices like Rialto Analytic Bridges into the same portfolio has an odd twang.

I bet they will sell a ton of Rialto IP units to complement existing Avigilon cameras. That's the low hanging fruit.

The next step for avigilon would be a strategic move which means folding to Schneider or GE as these companies are pretty much the best choice to take over this dinosaur!

That would imply Schneider, GE or someone else would be interested in taking them out at this point.

I've been thinking about the possibility of a that happening with Avigilon and am not convinced it will happen in the very near term. Their revenue and bottom line are growing at a very rapid pace, but based on their current run rate, sales only represent 1-1.5% of the global video surveillance market's estimated value for 2013, according to this article from July 2012, if those figures still hold true, and they seem to be based on what's been touted about lately. And the market is expected to continue to grow at close to a 20% annual clip for at least the next few years.

As John pointed out in previous posts, the current market valuation for Avigilon, although probably warranted given their track record up to now, is quite rich and that leaves only a select few candidates with the resources to afford a buy out of this size.

I'm thinking it's likely potential acquirers might wait out a little longer to see how they fare with the Redcloud and VideoIQ integrations. They've obviously executed very well up to now, but they haven't really provided any results that would include those acquisitions yet and that probably won't come until at least Q1 14, at which point the success of those products additions could become somewhat clearer. Any real interest in acquiring them might not come until the second half of 2014, if something was to materialize on that front this year.

Then again, if others expect they will continue to deliver as well as they have in the future, that would mean a much richer offer would need to be made down the road.

Does anyone see them making a play at the actual network switching infrustructure through an aquisition, using their remaining funding to have an even more complete closed end-to-end offering?

Highly, highly doubt it in my opinion. Too competive a field (network switches), they don't have experiance in it, and only reason I could think of is if they tried to do something special like Dedicated Micros' ClosedIP solution where the switches were part of an automatic connection and encryption solution, but DM never got anywhere with that that I know of.

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