I would strongly agree with Ron that Q4 / 1H of 2021 is going to be really busy for deals. The market is mature and consolidating the players and COVID will just accelerate that trend. If you have cash coming in, you need to push it back out or distribute it and there was a lot of money chasing the same deals last year as it was late cycle and money was cheap. It tends to be the good companies have a lot of quick offers at high multiples, the marginal businesses are probably more affected by COVID and are still sitting on the market. I would use a four year weight for an adjusted ebitda at this point because of covid 40% TTM, 30% 2019, 20% 2018, 10% 2017 and then apply your multiple based on that.
RMR is nice, but if you are specializing in a vertical market that is financially challenged, and they are stretching all their accounts payable to 120 days like the retail and restaurant verticals are doing, you will have some hard times no matter what. Integrators that have a broad spectrum of vertical markets that they serve will do fine thru 2020, and will thrive in 2021 because of it. A move to more RMR is inevitable as cloud solutions continue to mature, but if a customer runs into tough times, that customer does not stop paying only Cap Ex invoices, they stop and delay paying ALL their invoices.
Ron and the Graybeards have seen, and have done lots of deals, for both buyers and sellers. Next time we can ask him to talk about the new norms that will impact future deals. You have heard it before, key word “alarm-response”, a core value for millions of existing customers. It will have negative impact on the market and market value for “deterrent type” alarm systems (low or no priority alarm site response); and positive impact on interactive verified “defensive” systems (high priority alarm site response). Historically, nearly all RMR systems were considered the same, but the market is now highly fragmented requiring lots of segmentation; such as police notification vs customer notification; DIY, MIY, DIFY, fake warning signs/decals, motion sensors, audio/video/analytics, etc, etc. All of which demands lots of unnecessary police response via near 100% error/false alarms…. unstainable… a new-norm.