How Private Equity Rollups Are Impacting Independent Integrators, Says Security Owners Group
Private equity rollups are reshaping the security integrator market. Most well-known within the industry is Convergint, which has been sold repeatedly amongst PE firms, but newer efforts from Everon (formerly ADT Commerical), Pavion, and now Cobalt SP.
How are these deals impacting independent security integrators? We spoke with Armando Perez, the founder and managing member of the Security Owners Group, who leads a group of such integrators and spoke frankly about how they are impacted by the roll-up trend.
For background on the Security Owners Group, see How The Security Owners Group Aims To Improve Independent Integrators
For background on various PE-funded integrators, see:
- Cobalt SP Is Going To Become One Of The World's Largest Security Integrators (Co-CEOs Interview)
- Convergint Aims For $10 Billion Annual Revenue
- Everon CEO On ADT Sell-Off And Growth Plans Analyzed
- Pavion Aims To Be Top 3 Largest Global Security Integrator (CEO Interview)
Plus, for more from independent integrators, see PSA Security CEO Speaks About Integrators Getting Acquired
Executive *******
***** *** ******** ****** ***** ************ integrator ******** ** ******* *** ********* as ********** ** **, *** ***** believes **** **** ****** ** *********** and **** ****** ******** **** ********** benefit *********** ***********.
Valuations *** ******** **
*** *****'* ******* ******* ************ ****:
* *** **** ****** ********** ** selling **** * **** **. * think ****'* ******* *** ********** *** going **, *** ****** *** ******* excited ***** ****.
**** ** ********** **** **** ** are ******. ***** *** ********** ********* vary ********* ** *** ********* ** the ***********, *** ******* ******* ** have **** **** *** **** ****** is **** ****** ********* ********* *** rising **** ***** ****** ****** ** higher ****** ******.
Barrage ** *****
********, **** *** ********* **** *** more *****:
** *** ******* * ******* ** calls ** * ****** *** ***** basis **** ******** ****** ********* *** are ****** ** ******* *** ***** little ****** *****.
****'* ********** *** ********* **, "**, I **** ** ****** *** ** exit." ** **** *** *** ** a *** ***, **'* *** ******** for ** ***** ** ***, ***** I'll **** **** ************. **** ********* of ** **** ** ***** ** happen ** **** ****** *** ** closer ** *** *** ** ******'* minds.
****, ***, ** ********** **** **** we **** **** ** ******* ****** funding *** ********* *************. *******, ********** ******* ****** ******** ** ******** Security *****, **** ********'* ****.
Private ******'* ***** ** ******
**** ******* ****** ******* ** *** industry, ***** ******** *** ******* ****** firms ****** *********** ***** * *******'* EBITDA, *** *** **********:
******* ****** ********* *** **** ***** to ** ***** ** ******; ****'** only ******* ** *** ****** ****. That's ****** **. **** ***'* **** about *** ********** ** ****, ** least *** ** *** ****** **** the **** ********** **** *'* ******* with, ***** [*** ********* ****] ***-$** million [****** *******].
****'** ***** ** **** ***** ******* [up]. ****'** ***** ** *** ** run, *** **** ****'** ***** ** exit ** ****. ** *** *** Barker ** ****** ** ** ****** now. **'* *** ** **** ***** the ******* ** *** ******** **** private ******. **** ****'** ********** ** is **** * ******* ******* ** EBITDA, ******. *** **** **** ** see **** [*****] ******* **% [* year].
***** ****, ** ** ***** ****, Private ****** ****** ****** * **** balanced ******* ** ******* ***********, ********* EBITDA ** * **** ****** ** determining *****.
"Not ***** ******** ******* ** ****** **********"
** **** ********* *****, ******** ***'* EBITDA *** ****** **** *** **** important:
** *** *** ** *** ***, [firms ****] *** ****** ** **** going ** *** * ******* **** is ****** **********.Not ***** ******** ******* *** ***** ** ****** **********. There are a lot of people who enter this world of entrepreneurship in our industry and find nothing but frustration.
***** ******* ********* *** **** *********** integrators *** *** ** * ******** where **** *** ** ********** "****** performing" *** **** ** **** *********:
**** **** **** *****, *** **** have **** ****** *** **** **********, but **** *** ** *******.
[**'*] *** **** *********'* ***** ** sell ** *** ********** ******** ** one ** *** ******* ****** *****; not *********'* **** **. ***** ***** companies *** ******** ** *** ********* of *** ********. **'* *** *** mega ***********. *** **** *** ***** guys. *** **** *** ****** ****.
***** *** ******** ** *************, "*** everybody **** ** **** **** ** that," ***** ****.
Frustration ******** *****
**** ********* ** **** ********* **** reflects ** *****'* *********** ** *** or *** ********, ***** *****:
*'** **** *** **** * *** of ********* **** ** ******* ***** performance ******* *** *********** *** ****** so **** **** ****'** **** ******* on *******. [******** *****]
SOG ********* ******* ******
*** **** ** *** ******** ****** Group ** ** ******* ***** *********** integrators *** *** *** ** "****** performing."
***** ****** ** ****** ****** ***** private ****** *****, *** **** *********** integrators ***** *** ** ********** "****-**********" in *** ******* ** ******, ***** said **** *** ******** ****** ***** has ******** ****** ** *** ********/*********** on *** ** ***** ********* *******:
****** ** *** *** ******* ****** firms *** **. **** ****, ** started ***** **** ***** *** ********* metrics ** ******* ************** ** *** members *** ** *** ** *********** have **** ******* **** *** ****** for *** ******* ** *** **** we **** ***** ****** *****.
******* ** **** *** ********** ****** a **** ********* ****** ** ***** meetings,specifically ******* *** ******* ****** ** ******* **** ** ****** *** *********** *** *** *** **** * ******** **********. [Emphasis added]
***** ***** *** ** ***** ** "transform" ********** ******* *** ******** ****** Group's "******** **********," *.*.* *** "******" Group:
*** ********** ** *** ********** [*****], which ** *** ******** *****, ** anywhere **** $* ******* ** ******* to ******* ** $** ******* ** revenue. *** **'* *******. *** $* million ****, **** ********* **** * nugget ** ****** **** *** $** million ** $** ******* **** **** didn't ***** **, *** **'** ********* the ********, *** **** *****.
Working ** "*******," *** * ******** "*** **** ********"
******* ******** ******** ** ****** **********, Perez ********** **** **** ******** *********** on ***** **********, *** ******** ****** Group ***** ******* **** ** *** "net ******" ******* ** "******" ******* they **** **** ***** *** "*******" of ********* * ******** ******* ** valuing * ******** "*** **** ********." The ***** **** ********** ****** ** pay **** **** ** ******** ******** expenses:
** *** *********** *** ******. ** your ******** ** ******* **** * whole ***** ** ****, ****'* **** of **** *******, *** **'** *** to ****** *** *** ** **** with ****.
** * ******** *** **% ** debt, ** **** *** ****** ***** cash ** *** ***** ***** **** [could] *** *** ** *** ****, they're ***** ** *********** [** ****] because [*** ***** ****] ** ** them [*** **** **** ***********].
****'* *** ****.We **** ** *******. ** ***'* **** ** *** *** ***** [*****] *'* ****** ** ***** **** ******** *** **** ********. I'm running this business, and I need it to feed all my people. I need it to provide a reasonable return that's going to beat the market. [Emphasis added]
Optimizing * ******** / ****** ****
*********, ****** ****** ***** ***** ***** selling ***** ********** ** **** *******. Perez ****:
**** **** ***** ** *** **** performance ********, *** ************ *** ****. The ********* ***** ** **** ** the ******** *** ******** ***** ** take ** ***** ***. **** *** up *** ** ********** ** ******* as **** *** ** *** ******** business. *'** *** * $* ******* company, ** *'** *** * $** million *******, *** * *** *** x ********. ****, ** **** * could ***** ** ** ** ****, then * ***** *** **** ********.
Thrive ** ***********
********* ******* *** ****** ********** *******, Perez **** **** *********** *********** "****** on ***********" *** **** ******** ****-** happens, *** "******* *********" **** * chance ** "**** **" *** ***** that **** *** ******:
***'** ***** ** **** ** ** the ********* ***** **** *** ************ that *e ****** ** ***********. We want to perform. We **** ** ***** **** **'** ******. We want to compete because of the lack of a better term. Whenever there's attention going to a roll-up of multiple companies, you're going to see the smaller companies start to step up to that. We're the smaller companies. We are going to start looking for more resources. They're going to start looking for ways to differentiate. And it's not uncommon. [Emphasis added]
Capturing ********* ***** *********** ****
** ****-***, **** *********** **** ** have ********* **** "**** **** ****** take **** **" *** ********** "**** out ** *** ****** ** ***** funnel, *** ***** ********* *** ************* for *******, *********** ***********, ***** *****:
** **** *******. *** ** *** best ********* ******* *** ****** ** people *** ***** [**** ***] **** for * ******* ******* ** ******. The **** ***** ********* ****** **** integrators,the **** ** **** ** ***** ** **** *** ** *** ****** ** ***** ******, ***** **** **** ***'* **** **** **. [Emphasis added]
Small **** *** ***** *********** ***** **** **** *** ***** ***********
***** ***** **** ********* ***** *** mean * *** ** *** "**** integrators" ** **** ***** **** **** new ********* *********, **** ***** ** a "******* ******** ** *******" *** the *********** *********** ***** ***** ****** base ** **** *******:
** *** **** ** *** **** of ***** ********* ******** ** *** size ** *** ******* *********** [***********], when ***** ********* **** **% [**] 15% ** ***** *******, **** ** amassive ******** *** *** *********** [***********] from a sheer numbers standpoint. [Emphasis added]
*** [*** ***************], **** *** *** notice * **% **** ******* ****'** selling ** * **% ********. *** for **, *** ******* ****, *** [companies ****] *** $** ******* ** $50 ******* ** ****** *******,that **% **** **** ** * ******* ******** ** *******. [Emphasis added]
*** ***, ** ******* *** ****-*********** continuing ** **** *****, ** **** have *********** ******* ** ******* ** acquire *********. *******, ***** **** ******, it **** ** **** *********** ** see *** **** *** ****-*********** *** operate ** ** ******* ***** **** this ***** ** ******* ***** *** way ******* *** ******** *** *******.