Tyco Acquires Exacq
Tyco is spending $150 million in cash to acquire VMS/NVR manufacturer Exacq, who generated $54.6 million in 2012. This is one of the most expensive and significant deals in the video surveillance industry (see our directory of 25 acquisitions).
Exacq's Rapid Ascent
Exacq has been one of the fastest growing companies in surveillance, growing revenue 73% in 2012, faster than even Avigilon. Exacq now generates more revenue than Milestone ($54.6 vs $51.1 million). While the company's marketing has been relatively understated, expansion has been rapid.
Tyco's Struggles
Tyco, on the other hand, has struggled in IP video surveillance. Its video surveillance division, American Dynamics, used to be one of the top providers in the past decade, with its Intellex DVR line. However, AD has lost their way, acquiring a small VMS company (TridentTek in 2007 [link no longer available]) and then OEMing Exacq for its Hybrid Line. Today, AD has a poor fit in the market, with average products at above average pricing.
Premium Paid
Typically, surveillance manufacturers, like Tyco, prefer to pay pennies on the dollars for their acquisitions. However, Tyco is paying nearly 3 times Exacq's 2012 revenues, which is far higher than normal and at $150 million total, is quite significant. Despite Tyco already having multiple overlapping VMS / NVR lines, the hefty price indicates how much Tyco needs Exacq.
That noted, given Exacq's rapid growth and profitability, it is not an unreasonable price to pay.
Tyco Security Products Explanation
The VP of Global Sales at Tyco Security Products has sent a letter/email to their dealers, claiming that "Their products will be highly complementary additions to our current portfolio of American Dynamics video solutions." This is wrong as the overlap on the video management side is very significant as AD already has numerous VMS / NVR / DVR options.
What Will Happen?
Tyco will most likely ruin Exacq. They are Tyco, after all. However, what exactly happens depends on how Exacq is integrated and whether the Exacq management team will remain long term.
This is the second win for Exacq's founders, who previously sold Integral to Pelco and then turned around, built Exacq and kicked Pelco/Integral's ass. It is especially impressive because Tyco paid them all cash, which is a bearish sign for them staying long term within Tyco.
For Exacq's competitors, this is excellent news, because Exacq has been taking market share even from leading rivals for years (Milestone, Genetec and OnSSI included). Tyco does not add much even in the way of sales channel as Exacq as widely available through more than 1000 integrators and via distribution.
UPDATE - The Tyco / AD / ADT Connection
The biggest fear that other security manufacturers expressed is the connection between Tyco Integrated Services (the old ADT integrator) and American Dynamics. With a stronger VMS platform in Exacq, this may motivate Tyco to push Exacq at the expense of third party offerings. Avigilon, among others, has recently been touting Tyco as a major new growth partner.
Overall
I suspect the industry has just lost today, but it is a good outcome for the Exacq team who has quietly executed exceptionally.
UPDATE: Exacq Founder's Comment
Exacq's Tom Buckley offered the following comment to IPVM:
"Exacq Technologies remains as Exacq Technologies. Dave, Dan and I remain as executive management. They bought us for us, and did not have any built-in reductions in staff nor do they expect any consolidation of the sales channel. They expect us to grow as Exacq and there are natural synergies, particularly internationally where they have a strong presence and where we are weak. We may have a strong channel position in North America, but we are behind all of our major competitors internationally. We see this merger as a positive growth step in the company."