It is not easy to fathom out why... because like all multinational companies, up to 2008 / 9 they had an active policy of growth through acquisition and they all have strong cash reserves. By 2010 the security industry had got itself back to profitable growth and the industry had proved itself to be an attractive robust business, as our report shows.

Although company valuations have gone up they are still below 2008 levels. So what could be the reason or reasons for this change of attitude to this business? They have the money and attractive companies are available to buy at realistic prices. This has been proven when outsiders (some with deep pockets) are taking their share of the market, through acquisition without any 'retaliation' (so far).

In the report we delve into the details of the structure and shape of the market showing that most of the relatively medium to small companies are focused on one product area; specialise in introducing innovative technologies. Those that backed IP Networking products 10 years ago now hold the strong ground.

The multinational companies such as Bosch, Honeywell, Johnson Controls, Schneider Electric, Siemens and UTC Technologies are both product manufacturers and system suppliers and cover almost all aspects of physical security. When you take account of this and review market share on the basis of product sales (which our report does), then it shows that average market share figures are little more than 3% with the highest around 12%. If you then start to look at market share in some of the segments, say the fast growing IP Video networking camera market (not inconsequential at $1.3 billion) then the leading supplier Axis Communications has a share around 35% with no other supplier in reach.

You then have to wonder if some of the major traditional suppliers are spreading themselves thin on the physical security front and need to refocus on either the product or systems business or combine these to focus on particular product areas for specific vertical markets.

Most have been successful in growing their systems business during the last 3 troubled years. One of the major reasons for this is they have fed off their heritage estate business and at the same time have integrated activities from other parts of their organisation such as fire detection and extinguishing, evacuation control, mass notification and energy management into holistic solutions for their clients. Siemens have shown an acquisition appetite for specialists in verticals such as transportation; last year they acquired Republic Intelligent Transportation Services to expand their reach in the traffic solutions and services business. A combined portfolio of Siemens' products and solutions and Republic's services and maintenance provides an opportunity to leverage their expertise.

It has been quite clear since the beginning of this decade that in order to grow the business some fundamental changes had to be made to attract buyers. The new business model had to be built around "How through IP technology, do we move the clients security operations from a cost centre to a cash generator and converge with the business enterprise?" Because growth will get little benefit ‚ from marginally better economic trading conditions in the future but from new products and systems that deliver a better return on investment.

Our report shows that much of the investment in acquiring security companies in the last 2 years has come from outside the security business particularly Defense and IT / Communications companies. They are able to leverage their expertise to join up solutions with the business enterprise and we think they see this business as much more than a safe port in a storm.

So the traditional majors of the physical security business now have a growing number of new competitors from outside the industry and a stronger competition from product specialists in the middle ground. The recent manouverings of Tyco to split in to 3 separate companies with 2 based on security and safety is very likely to open up the opportunity for at least 1 "mega merger" in 2012 and our betting is that the traditional major players in our industry will not sit it out this time around.