Would a Hikvision / Pelco Deal Make Sense?

By: 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

IFSEC 2019 Show Report on Jun 19, 2019
The UK's largest trade show, IFSEC, is underway and IPVM has been examining what is new and happening at the show. Inside, we cover: Huawei...
The Scheme Hikvision and China Importers Use To Avoid Tariffs on Jun 17, 2019
Hikvision and numerous China importers are avoiding 25% tariffs by including an SD card slot in their IP cameras to claim they are 'digital still...
NSA Director Keynoting Dahua and Hikvision Sponsored Cybersecurity Conference [Canceled] on Jun 13, 2019
The technical director for the NSA’s Cybersecurity Threat Operations Center will be keynoting a physical security cybersecurity conference that is...
Embattled $400 Million China Funded Philippines Surveillance System Proceeds on Jun 13, 2019
An embattled 12,000 camera surveillance system project that will cost ~$400 million will proceed.  The project contract was awarded, had its...
Dumber Techs, Bad Box Movers, Says Australian Distributor on Jun 10, 2019
Techs today are "dumber" than they used to be, despite better education and training and that makes a typical day "frustrating" for one...
Dahua Shipping To Mexican Manufacturer on Jun 07, 2019
Dahua has shipped ~300,000 pounds of parts to a Mexico manufacturing facility, IPVM has verified in shipping records. Inside this note, we...
Hanwha Techwin Dropping Huawei on Jun 06, 2019
Hanwha Techwin is dropping Huawei Hisilicon from all of their products, the company has confirmed to IPVM. Inside this note, we examine Hanwha's...
"New" Arecont Fixes Failures "Without A Fight" on Jun 05, 2019
The "old" Arecont was infamous not only for its camera failures but for making their "partners" fight to get them fixed. IPVM drew the ire of...
China / US Trade War Impact Splits Industry on Jun 04, 2019
As the trade war continues to heat up, 170+ integrators told us "What impact will the US / PRC China conflict have on the industry?" Respondents...
Vidsys New President Interviewed on May 31, 2019
A decade ago, PSIM was hot with projections then of a billion dollar market by now. This has not come close to happening. However, Vidsys, one of...

Most Recent Industry Reports

Repositionable Multi-Imager Camera Shootout - Avigilon, Axis, Dahua, Hanwha, Hikvision, Panasonic, Vivotek on Jun 19, 2019
Repositionable multi-imager cameras are one of the fastest growing segments in video surveillance, with a slew of new offerings being recently...
Genetec Synergis Cloud Link - Complex, Costly and Confusing on Jun 18, 2019
Genetec's Synergis Cloud Link is complex, costly and confusing compared to competitor access control architectures. Inside this note, we examine...
Startup Vaion Launching End-to-End AI Solution Backed with $20 Million Funding on Jun 17, 2019
An EU / USA video surveillance startup, Vaion, founded by ex-Cisco Senior Directors is launching an end-to-end VSaaS platform with $20 million in...
Biometrics Usage Statistics 2019 on Jun 17, 2019
While face and fingerprint recognition are used regularly for smartphones, it is not as common in physical security. In this note, we examine...
The Scheme Hikvision and China Importers Use To Avoid Tariffs on Jun 17, 2019
Hikvision and numerous China importers are avoiding 25% tariffs by including an SD card slot in their IP cameras to claim they are 'digital still...
Sighthound Transforms Into Enterprise AI Provider Profile on Jun 14, 2019
Sighthound is now rapidly expanding its R&D team, building an enterprise AI service. This may come as a surprise given their origins 6 years...
ADT Eliminating Acquired Brands, Unifying Under 'Commercial' Brand on Jun 14, 2019
ADT is eliminating the brands of the many integrators it has acquired over the past few years, including Red Hawk, Aronson Security Group (ASG),...
NSA Director Keynoting Dahua and Hikvision Sponsored Cybersecurity Conference [Canceled] on Jun 13, 2019
The technical director for the NSA’s Cybersecurity Threat Operations Center will be keynoting a physical security cybersecurity conference that is...
Farpointe Data Conekt Mobile Access Reader Tested on Jun 13, 2019
California based Farpointe Data has been a significant OEM supplier of conventional access readers for years to companies including DMP, RS2, DSX,...
Embattled $400 Million China Funded Philippines Surveillance System Proceeds on Jun 13, 2019
An embattled 12,000 camera surveillance system project that will cost ~$400 million will proceed.  The project contract was awarded, had its...

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