Top US Integrator Acquired by European Conglomerate

By John Honovich, Published Nov 18, 2009, 07:00pm EST

Adesta [link no longer available], one of the top US integrators and representative of network convergence was acquired by European based conglomerate G4S. In the US, Adesta is well known as a major player in the high-end integration of government, military and industrial systems.

G4S paid 'total cash considerations' of $66 Million USD for Adesta. Adesta reported $92 Million USD revenues in 2008.

Compare to Henry Brother, a publicly traded company is valued at significantly less Prices to Sales than Adesta (.72 for Adesta vs. .43 for Henry Brothers).

For an extensive discussion and interview with Adesta's CEO, see SSN's report and analysis on the GS4 / Adesta acquisition.

SSN discusses the role of recurring monthly revenue and the implicit valuation of RMR in that deal. While the security industry is infatuated with RMR, given Adesta's low RMR (Adesta reports only 10% to 15% of revenue was RMR), it's doubtful Adesta's recurring revenue was a major factor.

Interestingly, famous security analyst Jeff Kessler criticized the deal [link no longer available] saying, "If there’s a lesson to be learned here, it’s how a great company like Adesta probably should have gone at a high price but didn’t because they didn’t have a lot of recurring revenue." Kessler contends that a "typical installation company would derive at least 25% of its revenue from recurring revenue."

In my personal experience running an integrator, I think it is difficult to generate a significant percentage of recurring revenue when you are a fast growing company like Adesta. Big projects are the quickest drivers of growth. Integrators could certainly have larger percentages of recurring revenue but generally at the expense of dramatically less total revenue.

Compare to our recent examination of "Should Integrators focus on recurring revenue?"

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