awesome sell price
Ex-ADT President And PE Firm Pay $200M+ For Alarm Dealer Guardian
Published May 31, 2017 17:19 PM
Private equity firms are on the hunt for security companies with strong RMR numbers. One such security company, Guardian Alarm, was recently purchased by a private equity group and the former President of ADT, Mike Snyder [link no longer available], for over $200M.
IPVM discussed the acquisition, and plans for the company with Snyder, who is taking the role of Chairman. In this report we share details on the multiple paid, other companies that Snyder sees as attractive acquisition targets, and trends for valuations of security integrator companies.
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Comments (11)
Sean Nelson
May 31, 2017UM
Undisclosed Manufacturer #1
May 31, 2017what's the normal multiple then? 30x?
Brian Karas
May 31, 2017Average in this price range ($500K+) has been 43x multiple, but as you can see from the chart, it is very volatile. This is due to valuation trends, and the fact that there are relatively few deals this size each year, so you do not get a lot of results to normalize down to something more smooth.
In the 50K-100K range, the average is ~37, with a spread from 34x to 40x, much less volatility in valuations (this slide from the same Barnes Buchanan presentation referenced in the report):
UM
Undisclosed Manufacturer #1
Jun 01, 2017Thanks Brian. Don't know if I should view it in such way that Guardian was sold purely on the multiple. Just wondering how much their ratio of acquiring new accounts or even churn rate matter here.
Anyway, good info !
Brian Karas
Jun 01, 2017I'm sure all those factors matter, while these deals are often boiled down to the multiple on RMR, there are things that can affect RMR valuation both positively and negatively (some of this is covered in the Selling and Valuing Security Integrators report).
While I do not have that specific data on Guardian, they are based in Metro Detroit, where I grew up, and I met with them a number of times with VideoIQ and with Avigilon in my roles there. Their business was well known/regarded in much of the area, and "Guardian Alarm" stickers and signs on houses and businesses seemed to be at least as prevalent as ADT or any national brand. Thus, I would suspect their churn rate to be relatively low and account growth to be positive, which would have contributed to positive valuation. Additionally, they have been in business a very long time, with minimal changes to the overall business model, so I would think the historic data on growth, churn, pricing, etc. would help any acquirer make a better analysis.
UI
Undisclosed Integrator #2
Jun 01, 2017I posted about this on the other thread-- 38-42 is the normal deals closed range with some fire focused rmr plays going for the high 40s. Initial offers are usually 32-35. This one is a little bit exceptional due to company age which would mean they probably have a lot more sticky commercial accounts hence the higher multiple.
UI
Undisclosed Integrator #3
Jun 01, 2017Did they only purchase the Electronic Security side of the company? There was not mention of the Guard Service portion of the company.
Brian Karas
Jun 01, 2017The guard service was part of the purchase, but from the way it was described it was not a major factor in the valuation.
U
Undisclosed #4
Jun 01, 2017We believe “guard services” played (quietly) a significant role to justify the overall high multiple. Local police response is going away or already gone. Police response, public or private, is critical, for the retention of monitored customers, the market value of RMR, and future growth. Also see related Discussions on this IPVM site under “Home Watch Services”.
UM
Undisclosed Manufacturer #1
Jun 01, 2017JB
Josh Bylsma
Jun 01, 2017Additional alarm companies with large customer bases in these areas could be acquired to be rolled into Guardian's overall business.
We have seen a rash of consolidations/mergers in the hardware and technology space over the past couple of years. Could this be the beginning of consolidations targeting monitoring and service industry, within PhySec?
(Although the ADT/JCI merger could be considered the marked start of this type of consolidation)
For Guardian, this could be great. Infusion of cash, new leadership and marked growth potential that goes beyond organic growth. Another major player in this market (I live in Michigan) is EPS. Per Snyder's comments, I would guess this is apart of the conversation, as they are the next major player in this territory.