Failed Integrator Rollup, Securadyne Sells to Guard Giant AlliedBy Dan Gelinas, Published Apr 10, 2019, 01:21pm EDT
One of the most ambitious integrator rollups of the decade has reached its conclusion—selling to a mega guard company. Allied Universal has announced it has acquired Securadyne.
Inside this note, we track the challenges that Securadyne faced acquiring numerous integrators and the new challenges faced inside of the mega-guard company.
While Allied is overwhelmingly a guard provider, the company through the Securadyne and other acquisitions is trying to move beyond the guard company label to become a "one-stop-shop."
Securadyne had 2018 revenue of ~$73 million, according to the acquisition announcement, as shown below:
In the seven years since its founding, Securadyne has reported revenues ranging from ~$33 million to ~$75 million but has been flat in the last five years, as seen below:
- $73 million in 2018
- $71 million in 2017 [link no longer available]
- $73 million in 2016
- $70 million in 2015
- $75 million in 2014
- $69 million in 2013
- $33 million in 2012 [link no longer available]
The company more than doubling in its first two years of operation is primarily attributable to its acquisitions of 4 other integrators worth ~$60 million in revenue, all completed by 2014.
Revenues, after Securadyne stopped acquiring, have been down / flat, showing a lack of organic growth.
Such flatness is exemplified in the following flat chart from LinkedIn Premium, which shows Securadyne's flat headcount numbers from 2017-2019:
The company acquired four integrators with a total revenue of ~$60 million, as shown below:
- 2012 - SecureNet [link no longer available], which brought ~$16 million in revenue to Securadyne
- 2012 - Surveillance Specialties Ltd. (SURV) [link no longer available] We estimate revenue of $10+ million based on a 2012 Security Systems News story about the acquisition that cites "all 77 SURV employees" joining Securadyne.
- 2013 - Advanced Control Concepts, Inc., (“ACC”) [link no longer available], which had ~$6 million in revenue when acquired
- 2014 - Intelligent Access Systems of North Carolina [link no longer available], which was worth ~$25 million based on the acquisition announcement that states IAS brought Securadyne's total revenue to ~$70 million. SDM cited Securadyne as starting out 2013 with ~$43 million in revenue.
Securadyne did not meet the growth they projected. For example, just a few years ago, a 2016 story on Securadyne projected the company would have 2017 revenue of $90 million, as shown below:
Securadyne missed that projection by ~21%.
The same 2016 story quotes Securadyne's growth ambitions as being "halfway" to where they wanted to be:
“Our two primary objectives [when we began] were scale and cloud.... Our footprint today is concentrated in the eastern and southern U.S. I would say we are about halfway to where we want to be in terms of geographical footprint.
At the time of their acquisition, Securadyne was active in 17 locations across the US, according to the acquisition announcement. In the 2016 story, Securadyne said it had 18 locations as seen below:
The 2016 story says that Securadyne expected a 15% growth rate for 2016 and 2017. They actually grew ~2% from 2015-2016 and shrank by 1% from 2016-2017.
The story certainly makes clear the company expected to grow much more than they did:
Unfortunately, private equity firms do not exist to hold companies that are flat.
The question is what has Allied gained by the acquisition and what is their plan Securadyne?
Allied, with ~200,000 employees according to their site, had 2018 revenue of ~$5.5 billion, according to its CEO Steve Jones in the following video from ASIS' 2018 GSX Conference in which he discusses the company's outlook and roadmap:
Allied's 2018 acquisition of U.S. Security Associates brings their revenue up to $7 billion, as seen below:
Allied has also executed a number of acquisitions in recent years as it attempts to "change the way [they] do business" and become a one-stop-shop that can "cover all your security needs," according to Allied's Jones in the above video.
Allied's acquisitions include the following:
- US Security Associates in 2018
- Covenant Security Services in 2018. The release reports that Covenant brings "1,900 employees and a presence throughout the U.S." It also states that "Covenant represents $80 million in annual revenue."
- Source Security & Investigations in 2016
Securadyne brings ~250 integration employees to the Allied fold.
The funding will help Allied realize more M&A activity, the release states.
Allied is primarily a guard company that operates in many different verticals. Their recent acquisitions represent an effort to branch more into security systems design, installation, and service. It is notable that they have tried to branch into the atypical security hardware solution of robots with partnerships with Knightscope, and Robotic Assistance Devices (RAD). However, this segment is cannot be providing much revenue for Allied based on Knightscope's poor 2016 revenue of ~$426,000.
Allied also provides janitorial and staffing services.
Input From Allied & Securadyne
A request for input from Allied and Securadyne prior to publication was not returned. However, we did receive an email from Securadyne's Boethel after publication:
Nice article today. Wrong on multiple accounts and totally ill-informed. But I suppose it was entertaining for an ignorant few.
After we received the initial objection, we asked for more communication to add his color and context to the article. We have not heard back from him.
A number of companies have tried to roll up other integrators and fight the fragmentation with consolidation. Take, for example, ADT, who made a 2018 acquisition of Red Hawk to re-enter the commercial space. Red Hawk was ADT's 8th acquisition in 2 years. Red Hawk, itself, had acquired 5 other integrators in the 2 years prior to ADT's acquisiton.
The problem with this type of business model is that the emerging mega-company is left after each acquisition with all the problems and operational inefficiencies of the smaller company. Time, money and other resources are typically used to combat these issues and keep them from infecting the parent company.
Securadyne has now become a small part, 1% by revenue, of a giant company. It will be interesting to see if Allied can make good on their ambitions and become a one-stop-shop. The challenge will be to see if they can leverage all of their existing contacts, customers, prospects, and partners and use their acquisitions to build a successful integration business on top of their sizeable guard business.
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