Industry Vet Buying Integrators For New Conglomerate (DFENDUS)

By IPVM Team, Published Dec 21, 2017, 08:51am EST

Industry veteran Dan Marston [link no longer available] has started a new company, DFENDUS [link no longer available], with the specific goal of buying up integrators to form an operating conglomerate.

IPVM spoke with Marston to understand his strategy, the kinds of integrators he is after, and plans to expand beyond Canada, where the company is based.

In this report we outline Dfendus' plan, and how their approach compares to Convergint's integrator buying spree.

Founder **********

******* *** * **** background ** ********, **** of ** **** *******, and **** **** ********* after *** ****** ******** the ******. *** ********** is ********* **** ***********, holding ********** ***** ******** sales *** **********-******* *********. He ***** ** *** this ********** ** **** his *** ******* ******** and ***** *********** **** look ** ********.

DFENDUS ********

*** ******* *** ****** backing ** **** ********* and ******* ** **** integrators ******** ** ******* under ***** ******** ******** after ***** ********, ****** "a ******* *******" ** their ******** *********.

*******'* **** ** ** get *** ******* ************ to * $**** ******* "as **** ** ********", as ** ******** ******* this ***** **** **** up ************* *** **** larger ************.

** ***** ** ****** the **** ** ***** to ******** ** ********** and ******** * ********, Marston *** ********* ** in-house ***** ****. ** stated **** ***** ****** the ******** ********** **** doing ************ *** ****** the ***** **** ** become ********** ** ***** due ********* *** ***** pre/post **** *********. ******* claims **** *** ***** deals ** ** ******* as ** ****.

Typical ********** ******

******* ** ********* ******* at *********** ** *** $1M-$5MCAD ******* *****, ****** will **** ** ********* as ***** ** $*** in *******. **** ****** of *** ** ***, with * ******* ***** around $**,***/**. ** ***** to **** ** ********** an ********** *********** ******. Integrators **** **** ******** software ********* ** ******** their ******** ********** ****** areas **** ******* ********, quoting *** ********* ** other ****-****** ******* *** of ********** ********.

******* ****** **** ******* has * ***** **** allows **** ** ******* integrator ********** ******* **** what ********** ** ***** large ******* ****** ********* might ******. ** ***** this ***** ****** ** these ********** ** ********** option ** **** ***** business **** **** ***** not ********* ****.

********* *** ******* ** acquiring ********-***** ***********, *** has ******* ********* **+ companies, *** ****** **** may ****** **** ** acquisitions ** **** **** businesses **** **** ****** RMR ** *** ********* a **** *********** ******.

Guard ********** ********

** ******** ** ***********, Dfendus ** **** ******* to ******* ***** *********. Here *** *** ** key ** *** ******** being * **** *** for ** ***********, ********** an ******** ** ********** that **** ****-**** ******** contracts *** *********.

Valuations ****

***** ********** *** ******** to **** *******, *********** should ****** * ******* 30x ******** *** ***, plus **** ********** ****** for ******** *** ********* or ***** *** ******.

What ** ****** ****-****

******** ****** *** ******** to **** ** *** 2-3 ***** **** ****, though ** **** ***** this *** ** **********. Marston ****** **** ******** owners *** ****** *** agreement ********** ** ** carried *** ** **** and **** **** ******* will *** ******* ** change *** ***** ***** the **** ** "**** back" ***** ****. ******* payout ****** **** ** acquisition ** *.* *****.

***** *** ******** **** operate ***** *** ******** brand, *** **** ******** management ********* ** *****, Dfendus **** **** ** achieve **** ***** ************ through ****-****** **********, ******* that **** ********-******* ********* may ** ************ ** Dfendus' ********* ******.

Future ******* ******** ********

***** *** ******* **** not **** ** ********* plan *** *** ******** companies ** ******* ****** under *** ******* **** and ********, ******* **** this *** ****** ** the ****** ** ** feels **** ***** ** beneficial *** *** ********** operation.

DFENDUS **** ********

** ******** ***** **** discussed *** * **** term **** ******** *** DFENDUS, ******* *** ******** backing ***** ******** *** company ***** **** ** IPO, ** **** ** a ****** ********/****** ********** or ******* ******** ** some ***** ** *** future.

Compared ** *********** ** **********

*******' ******* ************** ** that **** *** ***** to ******* ******* ***********, often **** ******** **** than **** ***** ** attract ** ********** ** other ****** *********. ** described ** *******, *********** acquired ** ******* ***** also ****** **** **** autonomy **** ***** ******** by **********, ** ******* does *** **** ********* plans ** ****** * national ***** ** ******** strategy *** *** ********** has.

Comments (12)

The hard part to me is keeping the “key” technicians onboard after a sale like they are targeting. Most often, those people are only one step below the owner in the long term importance category. Once again, it’s all about the RMR. 

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"The company has equity backing to fund purchases and intends to have integrators continue to operate under their previous branding after being acquired, adding "a DFENDUS company" to their branding materials."

Any indication of who the 'equity backing to fund purchases' group is comprised of?

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These roll-up stunts seem to have plenty of appetite for unstellar integrators.  They talk investorBabble and RMR and stuff but there's generally not any sign the new entity will be any more competent at handling modern problems.  A nationwide integrator brand that sucks just like the local firm used to suck does not add value for the customer. (remember the customer?  you're living on their money....)

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  Integrators that have deployed software platforms to optimize their business operations around areas like vehicle tracking, quoting and invoicing or other back-office systems are of particular interest.

Yes, that indicates they are well organized. But if part of the goal is to have common platforms all the "branches" use to leverage the value, then it will become a question of if a prospective acquisition is already using the same platform as the conglomerate.

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(Comments from an outside observer)

Another subtle, but big difference, between the business models of Convergint and Dfendus …. doing business without on-demand police response. Major Canadian communities have already adopted full disclosure VR-Verified Response, and private security has responded accordingly with compatible business models. Good example is AlarmForce (recently sold to Canadian telco). Law enforcement in the US is moving fast in the same direction, but alarm companies are moving slowly with millions of their imbedded base… could be a decade behind, with lots of in-compatible business models. We believe Convergint will be looking at some clumsy “integration” issues.

Source: Lee Jones; Support Services Group; leessg@att.net

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The value in most smaller integration companies is their people. Period.

In most cases, the best people will leave after the company after an acquisition occurs, if not immediately, then within the next year or two. The acquirer is then left with a shell of a business where most of the remaining employees are just hanging on for a paycheck and could care less about the company or its customers.

I have seen this play out time and time again over the last 30 years with very few exceptions.

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I agree. Probably close to 100% of the time. And not much different results in large acquisitions.  I am always amazed when I hear of big acquisitions like Charter buying Time Warner. And can't imagine the amount of headaches involved it that. I don't usually talk good about any companies that size because they are too big to provide good customer service. But I will let them win the acquisition award every time and would never attempt that feat.

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Marston stated that business owners can expect the agreement negotiated to be carried out in full and that they company will not attempt to change the terms after the sale or "claw back" money paid.

 

 

I've never heard of Marston or Dfendus. But this statement alone would keep me from trusting them. But I have stereotyped wrong plenty of times.

 

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He was referring to cases where integrators come to an agreement with a purchaser and the agreement sets terms like "We will pay $X, provided the business meets growth projections of at least X% for the next two years". In some of those cases "X" is not practical, or other factors prevent that growth and the selling owner winds up with less than the agreed upon amount.  Marston/Dfendus are saying "if we agree to pay $X, you will get $X".

 

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I was pretty sure of what he meant and understand your interpretation. I just don't like the idea of defending yourself before any wrongdoing for something that should be an unspoken rule. 

I'm probably not explaining it correct, but my too favorite comments I can compare to are when somebody starts out by saying:

"To be completely honest with you, I .........."

or

"I'm not gonna lie, I ....." 

These comments shouldn't need to be spoken. Going into a business deal you abide by the contract regardless of the outcome. The other company telling me that doesn't reassure me. It makes me think that the contract is worthless and at the end of the day they have the power to pay or not. 

Like I said, they are probably very good people. I tend to over think little stuff like this. If I was having this conversation with my wife, now is about the time she punches me and says quit talking to me. :) 

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The Clawback is a common angle when buying a company. The goal is to agree to a 30x - 40x RMR sale price, then (In the words of one really respected industry person I dealt with) you shake that RMR tree as hard as you can after the deal closes. You seperate all of the non-payers, late payers, and overall Accounting Dept time suckers from the "good" accounts that are worth the 30x - 40x acquisition price. In the end, you end up picking up the weak accounts for pennies on the dollar and not paying top price.  The RMR Clawback. The RMR industry is brutal.  

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Update: DFENDUS notified us that they have acquired Actron Security Systems of Woodbridge, Ontario.

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