The announcement last week that HID Global will buy Mercury Security, subject to regulatory approval and customary closing conditions, could have very significant implications; Bringing forward integration & total solutions across identity management and access control. The question is will this help deliver open or proprietary systems?
Lets first of all put this deal in the context of acquisitions in the physical security manufacturing industry in the last 24 months. Our records show that there has been a decline in the number of deals over this period with only 3 significant deals this year, with Mercury looking to be the highest in value.
Financial details have not been released but it should have achieved an exit multiple of over 3 times its annual revenue. This is based on 9 years of recording M&A data analysing exit multiples. This would have realized a price of over $200m, which is big for a PACS business. Mercury, owned by ACRE, has operated as a separate business and is believed to be very profitable.
HID has a substantial market share for access credentials and readers where Mercury sells controller hardware. This enables a very strong synergy bringing new opportunities to Mercury and increasing market share for HID’s niche controller business.
However Mercury’s most important value is that many of the top mainstream access control vendors including Lenel, Honeywell, RS2 and Keri, integrate with the same Mercury hardware firmware, which has become a defacto 'open' architecture standard. This no doubt is a very important prize for HID Global, and could tempt them to create its own proprietary end-to-end system.
The Access Control business has remained largely insulated from the open platform revolution that IP Video Surveillance has greatly benefited from and ONVIF has so far not received the support from the PACS business that is needed to make the business an open one.
Possibly ACRE has taken the view that ONVIF will eventually win and now is the time to sell the "cash cow". Nevertheless they have been smart in selling Mercury to a solid, long-term technology partner making this a win-win for all companies involved.
HID Global’s strategy is to maximise the status quo whilst it lasts and build a much stronger relationship between Identity Management business and Access Control. It would be naïve to think that they will not leverage Mecury’s strengths in the meantime.
You can find more information on the Security industry in our report The Physical Security Business 2016 to 2021 - https://memoori.com/portfolio/physical-security-business-2016-2021/.
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