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 Revenues
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:
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:
Securadyne Acquisitions
The company acquired four integrators with a total revenue of ~$60 million, as shown below:
Securadyne Growth
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 revenue
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 Acquisitions
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:
Securadyne brings ~250 integration employees to the Allied fold.
Allied Funding
Allied also announced in February of 2019 that it had closed on $400 million in funding from CDPQ, a Quebec-based investment firm whose net assets total ~310 Billion CAD, they claim.
The funding will help Allied realize more M&A activity, the release states.
Allied Segments
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.
Cautionary Tale
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.
Outlook
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.
Why would you include "failed" in the title of this article? Wouldn't being acquired and this being viewed as failure all relative to the beholder?
Would they have gone out of business or faced some other immediate financial crisis if they didn't sell to Allied? Without knowing the acquisition price/terms, it would be difficult to know if this was a win-win or how much the scales tipped in either direction.
It was, as we titled, a 'failed integrator rollup'. We are not claiming they went out of business (obviously they did not) but they aimed to rollup integrators and they failed in that endeavor.
Proof:
(1) They were founded and backed by a private equity firm to roll up integrators and to "achieve a national footprint."
(2) They bought out a number of integrators many years ago.
(3) They stopped buying integrators many years ago.
(4) The acquired companies accounted for virtually all revenue.
(5) Their revenue was flat to down for half a decade, a very long time, and they did not come close to having a national footprint.
Without knowing the acquisition price/terms, it would be difficult to know
When a PE-backed firm is flat for 5 years, you can be assured that the terms were not favorable.
And that Securadyne has struggled for years has been no secret among executives, though, of course, in public, people will pretend that things were great.
John,
Thanks for the back-up. Here's the thing ... Wasn't Securadyne one of the security industry's rag mags golden child not that long ago? You know, #1 of the Fast100 or something like that. I know the general rule in the industry mag world is that you gotta pay to play, but the sheer amount of smoke and mirrors that is probably being pushed out ... Oh well ....
Wasn't Securadyne one of the security industry's rag mags golden child not that long ago?
Lol, yes, agreed.
It's like the trade mags pretending the US government ban of Hikua does not exist. They seek to promote large companies.
Update, 2 days after this, SIW did a post on the NDAA and Hikvision, in which they explicitly called out "NDAA’s barring of Hikvision products". That was much more direct than when the ban was passed in August 2018, SIW's post was the obscuringly titled Hikvision, Dahua respond to Senate vote
This is precisely what I was thinking hence why the title shocked me. Securadyne was ROUTINELY on SDM’s fast 100 and they did a full article on the no too many years ago.
perception is not reality it would seem
Because clickbait, that's why. Unfortunately it's become the modus operandi for IPVM "articles" pretty much across the board.
I find it extraordinarily reckless of IPVM to make such a statement. Whether intended or not, the immediate read from the headline alone is that Securadyne has failed, which they clearly have not. It's not good enough to announce in the headline that Securadyne was acquired, and then to hash out the OPINION that they have "failed at their goals" -- it has to be included in the headline, because ciickbait.
I have zero affiliation to Securadyne whatsoever, but I can 100% understand Boethel's response. When you start an article from such a garbage position, there's not many places you can go after that.
Hello, Undisclosed #4. Thank you for your input. We've addressed our use of the word "failed" a couple of different times already in the comments.
(1) They were founded and backed by a private equity firm to roll up integrators and to "achieve a national footprint."
(2) They bought out a number of integrators many years ago.
(3) They stopped buying integrators many years ago.
(4) The acquired companies accounted for virtually all revenue.
(5) Their revenue was flat to down for half a decade, a very long time, and they did not come close to having a national footprint.
And also:
Matt, the VC investment plan, disclosed at the time of the investment, was to acquire various integrators and achieve a national footprint.
They never achieved a national footprint and they stopped acquiring integrators 5 years ago, so they did not achieve their plan.
Maybe the plan was to increase RMR, contract revenue, and customer size in order to double the EBITDA multiple on exit
They said exactly what the plan was as late as 2016:
2016 is projected to grow at a 15 percent rate, as is 2017, a rate Boethel views as healthy but manageable.
But that plan failed too and we know this because Allied, in the acquisition announcement, showed Securadyne 2018 revenue to be the same as Securadyne reported for 2015.
The fact that it takes you 11 bullet points and 201 words to "address" the use of the word "failed" is exactly my point.
It's completely reasonable from a journalistic perspective to state the opinion that Securadyne "failed" within an article and then to back up that position.
Instead, you chose the clickbait -- or as the Trumpers love to call it, "FAKE NEWS" -- route and instead threw an inflammatory word that can be taken completely out of context by the casual reader and put it into the headline.
I have said it before and I will say it again -- I don't know why IPVM insists on using grandiose and absurd headlines and statements when they simply aren't required. I would think/hope that it would be IPVM's goal to be seen as entirely objective, but headlines like this are the antithesis of objectivity.
grandiose and absurd headlines
"Failed Integrator Rollup" is a direct and accurate characterization of what Securadyne is.
the immediate read from the headline alone is that Securadyne has failed
Because you read 2 words instead of 3.
I usually don't have time or care to respond to comments like these but If your only reading headlines and making overall opinions based on them- then that's part of the problem you're describing.
Consistency is what matters and IPVM has been nothing short of that. It's like with anything- Take what you can learn from and leave the rest.
Is it easy to speculate what they did wrong with the 6-year flat-line? Was it is just as simple as they had the idea: "hey, let's buy 4 companies and 1+4=7" but when in reality they had no real scale plan & became a 'larger' company with poor communication & process which strangled the growth...
When you get to the north of 20M mark I can see how easy it would be to paint the numbers scale story to investors about 'growth through acquisition model' - I'm just curious as I'd love to learn the larger lesson here but that's all I see on the surface.
This 2016 SDM article, once you strip some of the (obvious in retrospect) hype has some good information about the problems Securadyne hit.
A particularly funny one from their CEO is:
Relative to the cloud, I believe we have definitely achieved thought leader status, but the enterprise market adoption of cloud has been slower than expected.
As if PE firms care about thought leadership. Net/net - bet on cloud, was way too early, lost.
I don't think that was the only problem, they even admit culture problems with rolling up integrators:
If handled incorrectly, acquisitions could easily create a highly fragmented culture and infinitely many different operating methodologies.
They admittedly then go on to tout that they solved it:
We developed a unique and proprietary means of integrating acquisitions that drives consensus and strategic alignment within our employee base — both existing and newly acquired.
But hard to believe that is true since they also claimed:
2016 is projected to grow at a 15 percent rate, as is 2017, a rate Boethel views as healthy but manageable.
And they achieved 0 growth in 2016, 2017 and 2018.
This is why Convergint is still so fascinating. Their 3 year run of unprecedented integrator acquisitions is either groundbreaking or laying the ground for a collapse. Bringing so many integrators together is super hard.
"Thought leader status" yeah unfortunately most people don't know they give those out for free in the back of the store.
It seems so much more pragmatic to buy one. Let it settle- do a lessons learned after 3-5 years and then do another one another 3-5 years same process. Then maybe go out and try to speed-up start to scale. The problem is when you take the money the investors want it spent as fast as it was given and most business models are not run on patience.
Thank you for the cross analysis!
“Thought leader” is my favorite part of this article. Someone’s been on LinkedIn a little too much.
Thomas, I’ve worked closely with this company and much of their team and I’ll offer a different speculation on what led to their failure. They lost perspective on the value of their team members. They had rockstars both in sales and management that they either failed to retain or intentionally drove out. That management style becomes especially risky when selling to the enterprise market which requires high end talent.
#2, I was aware of them losing top people in sales and management. What I was not clear about was what caused it? Do you have any theories about why? What about 'that management style'?
Perhaps personality conflicts in some cases but I suspect a general under-appreciation for what is was that made the companies they acquired successful to begin with. Top talent is difficult to replace, as are the customer relationships they establish. Processes and creating a new culture are fine, but failing to prioritize the value of the company’s human asset is a mistake.
Excellent point #2.
3+5=11 does not work if you lose the buy-in of the people who made those companies worth acquiring in the first place. After all, Cary was not purchasing troubled companies, but rather those that had excelled and offered a proven business and value prop for their client base. Those same companies are only as good as their client base and the excellent account managers and project managers that keep them happy.
0% growth is not surprising to me if the the critical buy in drifted away...... In fact, I might have expected more of an actual decline...........
In my experience, growing our businesses is very hard work--Bottom line.
I would be interested to see the 5 year P&L or at least growth pattern of the acquired companies pre-acquisition.
Please note, we added to the "Input" section after hearing from Securadyne President & CEO Carey Boethel this morning. After we received his initial objection, we asked for more communication to add his color and context to the article. We have not heard back from him. Carey Boethel's response is below:
Nice article today. Wrong on multiple accounts and totally ill-informed. But I suppose it was entertaining for an ignorant few.
While not worded eloquently it's plausible that he's 100% correct,;I'm new around here but the few M&A related blog posts I've seen here so far make it seem like any such transaction requires a company that's struggling mightily. Then the competitors jump in and get their licks in. Is it required that the swords come out every time corporations make moves? I'm sympathetic here and I'd take being flat at $75,000,000 if the margins were good
No doubt I'd take predictable profitable business anyday over this but that was not the situation. Investors with growth expectations were funding the acquisitions.
First off, I really dig the effort put in to the story with all the research. I don't know how it could be considered a "fail" without knowing the numbers or what the VC investment plan was. Maybe Allied was desperate since Securitas got into the electronic arena and needed to add the capability in order to not lose market share. Maybe the plan was to increase RMR, contract revenue, and customer size in order to double the EBITDA multiple on exit... Not all revenue is the same. I think the next question is can guard companies succeed as integrators?
I don't know how it could be considered a "fail" without knowing the numbers or what the VC investment plan was
Matt, the VC investment plan, disclosed at the time of the investment, was to acquire various integrators and achieve a national footprint.
They never achieved a national footprint and they stopped acquiring integrators 5 years ago, so they did not achieve their plan.
Maybe the plan was to increase RMR, contract revenue, and customer size in order to double the EBITDA multiple on exit
They said exactly what the plan was as late as 2016:
2016 is projected to grow at a 15 percent rate, as is 2017, a rate Boethel views as healthy but manageable.
But that plan failed too and we know this because Allied, in the acquisition announcement, showed Securadyne 2018 revenue to be the same as Securadyne reported for 2015.
"We developed a unique and proprietary means of integrating acquisitions that drives consensus and strategic alignment within our employee base — both existing and newly acquired."
http://www.andrewdavidson.com/gibberish/?companyname=securadyne
https://www.makebullshit.com/financial-bullshit-generator.php
#facepalm
Tom, that corporate gibberish generator site is funny, e.g., one of the results:
At securadyne, we have come to know how to incentivize strategically. Is it more important for something to be ubiquitous or to be C2C2B? If you envisioneer wirelessly, you may have to synthesize vertically. Think cyber-six-sigma. Without well-planned e-markets, relationships are forced to become customized, cutting-edge. What does the term "enterprise" really mean? The power to seize seamlessly leads to the capacity to cultivate seamlessly. We pride ourselves not only on our real-time feature set, but our easy administration and simple configuration. If you facilitate vertically, you may have to matrix strategically. We apply the proverb "The early bird catches the worm" not only to our macro-B2B2C e-commerce metrics but our aptitude to embrace.
One thing I have learned in 25 years in this industry is that history is doomed to repeat itself. Remember Niscayah?
New interview from Allied with Allied's CEO and Securadyne's former CEO at SSI. Allied's CEO calls his customers a 'captive audience' to sell technology to:
We realized we had a captive audience in our customer base that was very interested in having a security system solutions provider.
Adding that:
The convergence of manned guarding and technology as one total solution from the customer’s perspective is already here.
Saying that they aim to be #1 on both sides:
The goal is to be the unequivocal No. 1 U.S. provider of both manned guarding services and technology services
this is my favorite line from that SSI piece:
"CAREY BOETHEL: Technology is and has been an important part of the Allied Universal offering. Securadyne was viewed as a platform to which Allied can begin to grow a national and, eventually, an international presence in technology services. Securadyne was seen as a scalable way to really begin a strategic pivot."
So.... Securadyne couldn't pull off the national (let alone international) footprint model they sought, even 5+ years after rolling up integration companies - but Securadyne can do this for Allied now?
but Securadyne can do this for Allied now?
To play devil's advocate, it's not that Securadyne is going to do this for Allied, it's that Allied is so big, they might enable Securadyne to finally do what it could not independently. Allied has lots more money, lots more customers, etc.
Jone's quote about having a 'captive audience' in their 'customer base' is an extremely imprudent thing to say (customers don't like normally to be compared to prisoners) but, to the extent, Allied has power over them, they could deliver significant growth to Securadyne (or whatever it is called today). To be clear, I am skeptical about how 'captive' Allied's customers really are.
Update: Allied has now bought Advent Systems in the Chicago market, listing $42 million in revenue and 125 employees. Allied's CEO commented:
We are excited to continue our strategy of expanding our technology division in order to offer highly advanced solutions for our clients.
Between ADT, Convergint, and Allied, you have 3 large companies all actively rolling up integrators. Good for regional integrators but skeptical how well this will work out for all the buyers.
