HID Buys Mercury Security

By Brian Rhodes, Published Sep 19, 2017, 09:15am EDT

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One of the biggest access control deals in years.

Mercury Security, the most widely used access hardware OEM, and partner to 20+ manufacturers, has been purchased by Assa Abloy / HID Global.

In this note, we examine:

  • The Deal Rationale
  • Price and Valuation Estimates
  • Why Mercury's Vendor Neutrality Key
  • Profile of seller - ACRE
  • Detailed response from ACRE CEO
  • Analysis of value to HID
  • Why Partners are relatively relieved about this outcome
  • Risks to Mercury about HID's control

Deal *********

***'* **** ** ****** Mercury ** ********** *** footprint ** ***** ******** 3rd ***** *********** ********. While ******* * *** access ****** ** **** on *** *********** *** readers ******** ****, ****** Mercury ***** *** *** of, ** *** *** most, *********** *** ******* vendors ** *** ****** controller ******** ****** ** well.

Price / *********

**** ********* **** ****** paid $*** - $*** million *** *** ******* Security [****** - **** is *****, *** ***]. This ** ***** ** the *********:

  • **** ********* $** ******* USD **** ******* *** Mercury ******** *** **** Merucry *** "**** **** margin" *** **** "*** acquisition **** ** ********* to ***"
  • ****'* **** ****** ** ~16% *** ***** ****** valuation ** ~*.** ***** revenue.
  • ***** ****'* ********** ** Mercury's ******** **********, ** would ****** * ******** price ** ** ***** 2.3x *******'* ******* ** to * ******* ** ~4x *******, ***** ******** a $*** - $*** million ******** ***** ********.

[******: **** ****** **** ~$400 ******* *** *******, according ** ******* ***** to *** *******, ****** the ****** ******** ** Mercury (*.*., ***** *** only *********** ****** ******* panel ******** *** *** depth ** ******** / installers) *** *** ********* value ** ***.]

*******'* *******, ******** ** the ******** ******** (*** ****'* ******* *********), ** *** **** high. *******, ******** ** Mercury's ******* ***** ****** the ****** ********, ** fairly ***********. ********, ** also ******* *******'* ************* to ** ***** ******, both ***** ** ****'* comments *** *******'* ****** position ** *** *****.

Mercury's ****** ********** ***

******* ********'* ******** ** OEMing ****** ******** ********** to ******** ****** ******* vendors, *** ********* ***** on ******** *********** / management *******.

* *** ******* **** is **** ********* ****** vendors ***** ****** *** same ******* ******** ******* under ***** *** ******. Because ******* **** *** resell ** *** ******, many ***-***** *** ******* that ******* ***** **** their ****** ****** ** responsible *** *** ****** and *********** ** ***** parts. ******, **** **** 20 ********** ****** ******* vendors (********* *****, **, Honeywell ********, ***, ****, and **** *******) ********* with *** **** ******* hardware ********,***** *** ******* ***** as ** '****' ************ used ** **** **** 3 ******* ****** ***********.

***** *** ****** ***** application *** ***** ***** of ********* ****** ***********, Mercury ***** *** *********** products ******** ** ******* manufactured ******* **** ****** companies ********* ***** ***** alone. ********** ******* ******* then ******** **** ****** economies ** *****, ***** direct ******* ****** *** manufacturing ***** *** *******. Selling **** **** '***' channel, ******* *** ******** vendor ******* ***** *** company *** ****** ** the ***** ****'*.

Seller **** *******

******* *** ********** ***** by**** ***, ******* ** **** here -*** ***** ****** **** Access (****), ****** ** ****** HID *** *** ****** [link ** ****** *********], who ******** ******* ******** in *** ****.

******* ********* ** *** access ******** **** **** bought ******* **** *** intent ** ****, **** a ***** ** ********** the ******** *********** ******* and *********** ******** ******** rather **** ***** ** aggressive ******.

** *** **** **** owned *******, *** ******* development *** **** *****, with *** **** ******* release ****** ******** ***** ******** controller, *** ** ***** revisions ** ******* ** mainstream ********** *** ********* module *******.

ACRE *** ***********

**** *** *** ****** explained *** **** ** IPVM, ****** **** *******'* business ***** ******** **** the **** ** ***** portfolio, *** **** **** want ** ***** ** the ********* ** ****** and **********, ********* ********* acquisitions ************* ** ****:

*** ******** *** * strategic **** *** ****. The **** **** ** were **** ** ****** Mercury ** * ******* that ** * *****, long-term ********** ******* ** ACRE ***** **** * win-win *** *** ********* involved. ** **** ******** our ***** ************ **** HID ****** ** * technology ******* *** **** transaction ******* **** ************, which *** ******** ******* Security, **** ******** ** grow. ******* *** **** a **********, **** ******* in *** **** ******; however,Mercury ******** ***** * **** ********* ******** ***** **** *** ***** ********* ** *** ********* ** ** *** ********. This sale is the next step for ACRE that aligns with the overall strategy of building a security company around our core businesses and brands. In looking to further expand the ACRE family of companies, Vanderbilt will continue to focus and build on the strengths of their video, access and intrusion portfolios. In addition, ComNet will continue its focus on building both geographically and across new vertical markets such as Power Transmission and Distribution. The ********* ********* ******* ****** *** ********** *** ****** ********* *** ******** ** ****** and we will further explore the compliments in technology that span both organizations. With that said, ACRE **** ******** ** **** *** ************ **** *** ************* ** *** ********** *** ****** ********** with similar business structures, customers and channels to market. [Emphasis IPVM]

Good *** *** ***

******** ******** ** **** is **** *** *** is * ****** **** for**** *****/*** ******, *** *********** **** an ******* *********** ********* in *** ******** ****** market.

*** *** **** *** of *** ******* ********* of ****** *********** *** readers *** ******* *******, with *********** *********** *** credentials *** ******* ** many ** *** **** markets ** ******* ******** sells ********** ********. **** an ****** ******** ***** of ****, ***'* *********** brand ***** ****** *********** and ********* ******* ** Mercury, *** ****** *********** marketshare ** *** ***** controller ******** ** ***.

Already *** ***** ******** ******

*** ** *** ********* values *** ****** ** the *** ** ** established ********** *** ********** as * *** ***** controller ******. ***'* ******** controller *****,**** ****************** *** ****** ********* by ****** ******** *******, and *** ******* *********** just ******* *** ********.

** ***** ** ******* ** *** ** Mercury ****** ***************, *** *** ********* offer ****** **** ******* directly **** **** *****:

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** **** ****, ** is ******* ** *** will ***** ** **** all ****** ** *********** offerings. *******, ***** *** exclusive *********** ** ******* partners **** **** ******* products, ** ***** ******** that *** ******* ** Mercury's ********* **** ** made *******.

Neutral **** *** ********

** **** *** ** HID's ******** ****** **********, most ******** ******* ** spoke **** ********* ******* or ***** ******** ******* for ******* ** *** takes *******.

***** **** *** *** multiple ******* ** ***** own ******** **** ** with *** **** ********, the *********** ** *** will **** ** ******** existing ************* *** ******* streams ****** **** ***** things **** *******.

Relief *** *** ** *********

*******, ******** ******** ********* relief ** **** **** Mercury *** *** **** to * ************ ********** like *** ** ********* Electric.

****** *** *********** ** Mercury's **** **** ********* for ******* *****. **** the ***** *********** ******** issues ** *****************, ******* **** *** parent ************ ** ****** brand ***** ***, *** ultimately ******** ****** **, Mercury ******** ** ********* partners *** **********.

*** **** **** *** does *** ****** ******* its *** ****** ********** platform ** **** ** 'safer' *** ******** ********, regardless ** *** *** business ** ************ *******.

Risk **** *** *********** *** ************

*******, *** *** * lengthy ****** ** ********** and **** ************ ************* or ******** ** ********** after ***********. ** ****** years, *** *** ********* companies **** ********** ***************** ******* ********** ******** developer*********, **** ** *********** fold *** ******* ******** into ***, ******* **** existing ******* *** ********** or *********** ******* *********.

***** *********** ********* ****** on ******* ** ****** and ******** *** ********* management *********, *** **** of *************, **********, ** substantial ********** ** ******* as ** *********** ******** unit *** *******.

*** *** *********** ******** managing *** *** ******** business, ******** ******* **** several ******** ******* ****** HQ ********** ** ******, Texas *** * ****** of ******* ** *** credentials ******** **** ********** resulted ** *** ************** ******.

****

Comments (21)

I wonder what will happen to the rest of ACRE?  The other companies in the portfolio, while solid, do not have nearly the same singular presence in the industry as Mercury does.

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From what we have seen, ACRE does limited cross-selling / co-marketing of their various companies so my gut feel would that the others would continue to run independently. Yes/no?

One thought I had is whether ACRE will take the profits and turn around and invest in other access companies? i.e., repeat the process.

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HID knows what they do, Mercury boards offer more possibilities in many Access Control software comparing to HID boards. Especially while talking about the crazy ideas from end users.

I was missing in HID portfolio POE boards so now they have it :)

In middle and western Europe Mercury is not well known especially while comparing to HID so now they have better opportunity to expand also in this part of the world.  

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Does Lenel still make its own Mercury compatible hardware, in which they were accused of copyright infringement?

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I think those were called the "U" boards (Universal).  I doubt they are still being produced.

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Ah, got it.  I'll edit the wrong info out of my reply.  Thanks.

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My understanding is Lenel does not, although they support it.

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Found this:

The agreement, announced July 30, resolves the lawsuit, filed last summer by panel manufacturer Mercury against access control provider Lenel. That lawsuit alleged breach of contract and copyright infringement.

While terms of the agreement were not released, Kirmser said it ensures that Lenel and Mercury products will remain compatible “for at least 10-plus years and probably for a lot longer.”

Specifically, Lenel’s UIOs will continue to be supported by OnGuard. And while Lenel will not actively quote or market Lenel Universal’s IOs (UIOs) intended to work with certain panels (LNL-500, LNL-2210, LNL 2220 and LNL-3300), Lenel and Mercury will continue to support the compatibility of these products for those who installed them before the agreement or who are actively working on projects where UIOs are installed.

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HID buying Mercury is good for Mercury, HID and end users.  Not sure if their competition is pleased.

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Long live open source

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Long live open source

Can you elaborate how that relates to Mercury? Mercury is 'open platform' but it is not 'open source'. I might be missing the connection. Thanks.

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Right - Open platform, misspoke. Assuming that HID continues its policy of not creating its own proprietary end-to-end system and offers these boards as part of its open platform components, this is very good news for the industry. Door access control has, incredibly,remained largely insulated from the open platform revolution that IP Surveillance and VoIP went through and greatly benefited from. Perhaps this deal will help move access toward that end. 

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Why is it "incredible" that that access control has been insulated from the open revolution in IP surveillance?  It is a totally different industry than video:

It is a lot more complex to install access control on a door than it is to hand a camera on a wall or a ceiling.  There are safety codes, etc., not to mention that failures are much more disruptive.  If a camera fails, only the operators know it, and the camera still has deterrent value.  A door fails and people line up behind it, angry.

This, and the business model of access control is largely based on capitalizing service costs into hardware price markups.  This requires channel management, which is much harder to do with a commoditized, open source product.

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Access Not at all a completely different industry - video, intrusion and surveillance all fall under the security integration industry. End users expect these systems to inter-operate, as they are most often monitored and administered by a singular group within their organizations. If one major cog of that industry, access, remains soloed off on its own proprietary world with limited options and integration, that hurts our entire industry.

If door access systems manufacturers don't start moving in the direction of being software developers first, then others, such as the open platform VMS developers will start doing it for them ( already have).

I agree with the notion that door access has a higher profile both end user and AHJ-wise. But As far as reliability, there are already great companies making great open platform hardware that is incredibly reliable - HID, HES, Altronix, Mercury, etc. That hardware can be paired with an open platform software solution that concentrates more on solving customer problems and innovating and providing integrators with maximum options rather than locking out progress to protect proprietary hardware sales. That strategy has failed in all other sectors of our industry. That is why I say it is "incredible" that access has held out for so long. 

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ACRE CEO Joe Grillo explained the deal to IPVM, noting that Mercury's business model differed from the rest of their portfolio, and that they want to focus on the synergies of ComNet and Vanderbilt, including potential acquisitions complimentary to them:

The decision was a strategic move for ACRE. The fact that we were able to divest Mercury to a company that is a solid, long-term technology partner of ACRE makes this a win-win for all companies involved. We will continue our close relationship with HID Global as a technology partner and this transaction assures that relationship, which now includes Mercury Security, will continue to grow. Mercury has been a profitable, good company in the ACRE family; however, Mercury operated under a much different business model than the other companies in the portfolio as an OEM supplier. This sale is the next step for ACRE that aligns with the overall strategy of building a security company around our core businesses and brands. In looking to further expand the ACRE family of companies, Vanderbilt will continue to focus and build on the strengths of their video, access and intrusion portfolios. In addition, ComNet will continue its focus on building both geographically and across new vertical markets such as Power Transmission and Distribution. The immediate synergies between ComNet and Vanderbilt are shared customers and channels to market and we will further explore the compliments in technology that span both organizations. With that said, ACRE will continue to look for acquisitions that are complimentary to the Vanderbilt and ComNet portfolios with similar business structures, customers and channels to market. [Emphasis IPVM]

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I hope this means HID can leverage some engineering capacity from Mercury to fix the abomination known as the pivCLASS Authentication Module once and for all. The PAM hardware wasn't great when they bought it from Core Street and even though CodeBench software was a great improvement, to quote the scholars Beavis and Butthead, "You can't polish a turd." I have heard that the PAM version 2 is coming soon, but not soon enough for me. 

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Have you used the PAM-on-panel (on board authentication on the EP4502)?  In this scenario, the Codebench software runs on the Mercury board itself.

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We are setting this up in our office for testing, but have not deployed at a Federal site yet since it is just now on the APL and so far is only licensed for use to Lenel. We have had a few recent opportunities where we suggested this route to avoid the PAM nightmare, but the customer is running an Enterprise instance so they are unable/unwilling to update their servers to allow the use of this new option. Until Lenel has updated door boards with the PAM code it will continue to be a network hog, and even then there are major concerns with the pivCLASS readers. Fun fact that HID does not advertise, if the readers drop below 5VDC they will turn into very expensive paperweights. They have a letter that advises people who have had this issue to add their own 3rd party voltage regulator between the PAM and the reader to ensure power never goes below 5 volts, but their installation guide still requires the readers to be powered by the PAM, with no mention of a voltage regulator. I am also quite certain they didn't drop this info on Certipath during testing either. Seems to me that if they know this is a problem they could have incorporated the voltage regulator into either the PAM or better yet the pivCLASS readers. I would love to get a list of customers who have installed PAMs to compare notes. 

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"Well if I had money, Tell you what I'd do
I'd go downtown and buy a mercury or two.
Crazy 'bout a mercury"

-Alan Jackson

Hmm. HID followed his advice.

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When I saw the acquisition of Vanderbilt and Mercury I was reasonably sure ACRE was attempting to form a competitor for Lenel and SoftwareHouse.  

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UPDATE: Assa Abbloy paid ~$400 million for Mercury, according to sources close to the company, citing the unique position of Mercury (i.e., being the only independent access control panel provider and its depth of partners / installers) and its strategic value to HID.

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