Would a Hikvision / Pelco Deal Make Sense?

Author: John Honovich, Published on Feb 05, 2013

A persistent industry rumor says Hikvision and Pelco are in talks to do a merger / acquisition. Who knows the truth. Even if there are some talks, that does not mean anything will come of it.

In this note, we examine if it would make sense. It might happen, it might not but if it did, would it be a good deal and for whom?

Hikvision's Huge Growth

Hikvision has been growing enormously, fueled by China's bubbling surging economy, and now does over $1 billion USD total revenue, pretty much all in video surveillance. This is ~4 times the size of their 2009 revenue of ~$340 million USD (see Hikvision's financials). That's both unprecedented total revenue and growth rate for a large surveillance company. Moreover, they are extremely profitable with net income over 25% (top Western companies are typically in the teens).

Plus, Hikvision has a massive valuation and a lot of cash on hand. Today, the company is worth ~$10 Billion. To put that in perspective, that's more than 5 times Axis's valuation and probably equal to every video surveillance company in the Americas. Plus, Hikvision has close to $1 billion USD cash in the bank.

Hikvision's Challenges

Now, if you knew nothing about video surveillance, you might conclude that this company has groundbreaking technology and innovations that far surpass its competitors. However, that's far from the case. On a pure product / technology perspective, the company is middle of the road, at best, more in line with solid companies like ACTi and Vivotek.

Hikvision has been the one of the best and, judging by its financials, the biggest success in China. For example, in the last few years, Hikvision has expanded into Chinese massive Safe City projects including an $800 million integration project. Indeed, almost all Hikvision's revenue comes from inside of China. While Hikvision has been working hard to expand into the West, they are still trying to make their way, fighting without their core 'home field' competitive advantage.

Hikvision's Potential Motivation

Hikvision wants to be a top tier global player. They have a huge valuation and a lot of cash. One way to accelerate expansion would be to buy an established player, rather than take years and the risk of expanding incrementally into foreign markets.

Get Video Surveillance News In Your Inbox
Get Video Surveillance News In Your Inbox

Pelco would deliver a very well known brand and an established channel sales structure that Hikvision could tap into for 'global domination.'

Schneider Electric / Pelco Background

Schneider Electric owns Pelco and has for the past 5+ years, acquiring Pelco in 2007 for ~$1.5 billion USD. At that time, Pelco did ~$500 million in revenue. We suspect that Pelco's revenue today is still similar to that range as the overall Western market for traditional CCTV providers has been week over the past 5 years.

Schneider's Motivation

We suspect Schneider might listen but doubt they would be hugely motivated unless Hikvision offered a great price. On the one hand, the Pelco acquisition does not look like a huge success. On the other, it is a solid complimentary asset in the overall Schneider portfolio. While Schneider paid 3x Pelco's revenue in 2007, that premium is far out of line for mature companies today (March got acquired recently for less than 1x revenue by another Chinese manufacturer).

Perhaps Hikvision, with such a strong financial position now, is willing to significantly overpay to motivate Schneider.

Will It Work?

Making a deal like this work is a huge risk, unless Schneider is willing to give Pelco up at fire sale prices (which we doubt). Even if Hikvision acquired Pelco, there is huge overlap in product development / offerings. Would they gut the product side and just use their sales and marketing? If so, that's an incredibly high cost for such an effort. However, since Pelco has so many existing customers, they would like need to continue most of their existing offerings. And even if Hikvision could lower the cost structure with their Chinese based manufacturing, it would be nearly impossible to come close to the profit levels they enjoy within China.

This makes for a juicy rumor and a fascinating what if, but it does not make a lot of sense to us. If it happens, it will certainly be quite a spectacle, for better or worse but we suspect Hikvision is better off building its own International team organically.

UPDATE: Deal Fell Through

Multiple sources tell IPVM that the deal was in advanced negotiations but ultimately feel through.

1 report cite this report:

Why Dahua Should Acquire Pelco on Jun 18, 2014
In 2013, negotiations for mega Chinese manufacturer Hikvision to acquire Pelco broke down. At that time, we argued that it was a bad fit. However,...
Comments (12) : PRO Members only. Login. or Join.

Related Reports

From The Basement To Buried Behind Chinatown: ISC West Emerging Technology Zone on Feb 22, 2019
What does ISC West think about 'Emerging Technology'? Well, last year, they put those companies in the basement. This year, they moved them up to...
First US State, Vermont, Bans Dahua and Hikvision on Feb 21, 2019
The first US state, Vermont, has issued a ban on a number of Chinese and Russian manufacturers including the world's 2 largest video surveillance...
Massive Leak Of Chinese VMS Provider Exposes Xinjiang Surveillance on Feb 20, 2019
A subsidiary of China’s claimed largest VMS provider is tracking the precise location and ethnicity of millions in China’s Xinjiang region,...
Hikvision 2018 Revenue Tops $7 Billion USD But Growth Slows To Low on Feb 15, 2019
Hikvision's annual revenue topped $7 billion for the first time in 2018, although growth slowed sharply. In this post, we analyze the latest...
Hikvision Chairman Praises United Front on Feb 14, 2019
Hikvision’s controlling shareholder held a meeting last month praising the United Front, a Communist Party organization known for its secretive...
Barnes Buchanan 2019: Despite 'Strange Narrative' Great Time To Be In Security on Feb 11, 2019
A "strange narrative" is being spun, said Michael Barnes at the 2019 Barnes Buchanan Conference. However, despite that narrative, it is a "great...
US Senator Calls Hikvision and Dahua “Puppets of the Chinese Communist Party”, Urges Sanctions on Feb 07, 2019
Tom Cotton, Republican senator from Arkansas, has publicly called Hikvision and Dahua “puppets of the Chinese Communist Party and the People’s...
3 UK MPs Call For Investigating Hikvision Over Xinjiang on Feb 04, 2019
3 UK members of Parliament, including 2 with direct comments to IPVM, have called for the UK government to investigate Hikvision's Xinjiang...
Hanwha Techwin Favorability Results 2019 on Jan 31, 2019
Hanwha Techwin's favorability results surged, in IPVM's 2019 study, going from barely neutral in 2016 to strongly net positive, as the results...
Dahua China Significant Job Cuts on Jan 28, 2019
Dahua China has cut a significant number of jobs in the past few months, according to numerous sources. This is a significant shift from Dahua's...

Most Recent Industry Reports

From The Basement To Buried Behind Chinatown: ISC West Emerging Technology Zone on Feb 22, 2019
What does ISC West think about 'Emerging Technology'? Well, last year, they put those companies in the basement. This year, they moved them up to...
Private School IT Manager Surveillance Interview on Feb 22, 2019
This IT manager describes himself as the "oft-maligned IT person" whose "opinions may not always be appreciated by the integrator crowd." But he is...
Outdoor Camera Mounting Hardware Guide on Feb 21, 2019
Mounting cameras outdoors can be challenging, requiring understanding different types of equipment and methods. In this guide, we teach this...
HID Favorability Results 2019 on Feb 21, 2019
HID favorability results were strong, in the 2019 IPVM integrator study of 200+ integrators, with a net +62% and low negativity as the table below...
First US State, Vermont, Bans Dahua and Hikvision on Feb 21, 2019
The first US state, Vermont, has issued a ban on a number of Chinese and Russian manufacturers including the world's 2 largest video surveillance...
ADI 'SAVE BIG' On FLIR And Hikvision Examined on Feb 20, 2019
One is a major US defense supplier. The other is owned by the Chinese government. But you can "SAVE BIG" on both at ADI. In this note, we...
BluB0x Company Profile on Feb 20, 2019
BluB0x has doubled in revenue every year since its founding in 2013, according to CEO Patrick Barry. We originally reported on them in 2015. At the...
Massive Leak Of Chinese VMS Provider Exposes Xinjiang Surveillance on Feb 20, 2019
A subsidiary of China’s claimed largest VMS provider is tracking the precise location and ethnicity of millions in China’s Xinjiang region,...
Security Installation Tools Guide - 22 Tools Listed on Feb 19, 2019
In this guide, we cover 22 tools that security installers frequently use. This is one part of our upcoming Video Surveillance...
Sales Cuts At Rasilient on Feb 19, 2019
Over the past 2 years, video surveillance storage specialist Rasilient has expanded its workforce significantly, aiming to build its own branded...

The world's leading video surveillance information source, IPVM provides the best reporting, testing and training for 10,000+ members globally. Dedicated to independent and objective information, we uniquely refuse any and all advertisements, sponsorship and consulting from manufacturers.

About | FAQ | Contact