Security

Security Industry M&A – April 2011 came in with a Roar but went out with a Whimper

The first quarter results analysed in our monthly Executive Brief “The Physical Security Industry in 15 Minutes” showed that both consolidation and investment had slowed down significantly. In the first quarter of this year the number of acquisitions were 20% down on the same period of 2010 when Tyco made a $2 billion acquisition of Broadview Security. This was a disappointing start to 2011, but on Monday 11th April, Reuters broke the news that Schneider Electric was mulling the possibility of merging / acquiring Tyco International. This startling news opened up the possibility of realizing a $30billion deal, by far the biggest ever in this industry; having major implications particularly for the other leading suppliers in the distribution chain. Within days every analyst and pundit had reviewed the implications from all angles most commenting that this daring strategy could work but that it was risky. On April 21, Schneider quelled speculation that the company was […]

Stay ahead of the pack

with the latest independent smart building research and thought leadership.

Have an account? Login

Subscribe Now for just $180 USD per year per user ( just $15 USD per month) for Access to Quality Independent Smart Building Analysis!

What Exactly Do you Get?

  • Read every article published in full and get unlimited access to our archive of over 1,400 articles.
  • 10% discount on ALL Memoori Research reports for Subscribers! So if you only buy ONE report you will get your subscription fee back!
  • Industry-leading Analysis Every Week, Direct to your Inbox.
  • AND Cancel at any time
Subscribe Now
The first quarter results analysed in our monthly Executive Brief “The Physical Security Industry in 15 Minutes” showed that both consolidation and investment had slowed down significantly. In the first quarter of this year the number of acquisitions were 20% down on the same period of 2010 when Tyco made a $2 billion acquisition of Broadview Security.

This was a disappointing start to 2011, but on Monday 11th April, Reuters broke the news that Schneider Electric was mulling the possibility of merging / acquiring Tyco International. This startling news opened up the possibility of realizing a $30billion deal, by far the biggest ever in this industry; having major implications particularly for the other leading suppliers in the distribution chain.

Within days every analyst and pundit had reviewed the implications from all angles most commenting that this daring strategy could work but that it was risky. On April 21, Schneider quelled speculation that the company was exploring acquiring Tyco International, saying it prefers smaller deals and that there would be no large scale transaction in 2011.

There can be no doubt that Schneider had been taking a serious look at this potential acquisition but the shareholders and financial community did not like it and the board have been forced to call a halt. The risk is that this acquisition would have stretched their finances too far, which overruled the strategic benefits of driving their security business to the top of the league whilst at the same time providing them with a global market leading fire safety business. Both of these businesses have proved to be robust and have grown during the world recession.

So strategically this is an opportunity lost, for Tyco would fit in well with Schneider’s existing security / safety structure. There is no duplication with Tyco’s Fire Detection & Extinguishing business and surprisingly little overlap with their physical security business. Schneider’s strength is in the video camera surveillance market in the commercial sector acquired through its purchase of Pelco in 2008 and has a strong business in systems integration through a number of acquisitions that made up TAC (Tour Andover Controls). Tyco through the ADT operation is strongest in the residential market and Schneider does not play in that market apart from low voltage equipment.

The residential market for security is expected to play a major role in bringing together Home Area Networks (HAN), Energy Management and its interface with the Advanced Metering Infrastructure (AMI) a rapidly growing part of the Smart Grid. This new business would offer very significant longer term prospects for organic growth.

Had Tyco come into play then it is highly likely that Schneider would have had to fight off Honeywell, Siemens and UTC, but all of these companies have a major overlap in both fire and security. Whilst that does not obviously rule them out they would need to divest a significant part of this business in order to make the acquisition commercially viable. The deal would therefore be less attractive to them. In addition, Honeywell and Siemens would have been scrutinized by the European Commission with regard to market share implications in the fire detection market. ‚ It would appear that Tyco would not be adverse to a merger or acquisition so expect more rumors in the next 9 months.

There were no major deals this month but Tyco (ADT Security) scored again with the purchase of Proximex a well established PSIM supplier; following last month’s purchase of Signature Security which they purchased from Oceania Capital Partners Limited for AU $171 million. ‚ April recorded 2 two major investments, but as always alliance arrangements continued to be buoyant with some 9 identified, bringing the total number to 33 for the first 4 months of this year.

The most encouraging feature of the business is reflected in the financial performance of security players. The 4th Quarter 2010 and 1st Quarter 2011 financial announcements made recently show for the most part revenues and profitability well up on the same quarter of 2010 and the full year outperforming 2009. With almost all anticipating improved trading conditions in 2011, it looks as though revenues and profitability will improve on 2010.

The star performers in 2010 include Axis Communications, Mobotix, Basler, China Security & Surveillance, Authentec and Bio-Key, despite the fact that their 4th quarter was well down on 2009. These companies are very specialist and perform in the high growth areas of the business and / or strong in geographic markets that performed well in 2010.

Tyco, Honeywell and Siemens all increased both profitability and growth and are bullish about 2011. Cooper and Ingersoll Rand similarly increased their growth and profitability, whist Bosch returned to profitability on increased sales. ‚ With trading conditions looking buoyant and the drivers that accelerated consolidation and investment in 2010 still well in place we expect that the slowdown of acquisitions and funding in the first 4 months of 2011 does not indicate in anyway a correction but is just a short term deviation and 1 major acquisition would bring consolidation well back on course.

Most Popular Articles

Startup Acquisitions in Smart Building Technology
Smart Buildings,Uncategorized

Startup Acquisition Activity Remains Resilient in the Smart Buildings Space

Strategic acquisitions are enabling leading players across the smart buildings market to augment their technology offerings with bolt-on startup acquisitions in several areas and increase their focus on software solutions. This forms part of a 2 pronged strategy to mitigate the risk of market disruption, with leading players (and increasingly private equity firms) taking majority […]

Carrier Strategy Map Smart Buildings Building Automation
Energy

Mapping the Strategic Direction of Carrier in the Smart Buildings Space

This Research Note examines the emerging strategic priorities of Carrier Global Corporation in the smart commercial buildings space. We have mapped M&A, divestments, strategic partnerships and investment activity to ascertain the growth ambitions of the business, by categorizing the various business relationships by technology and investment type over a 3-year period. This article is intended as a non-exhaustive indicator of […]

The Long-Term Impacts of COVID on the Physical Security Market
Security,Uncategorized

Exploring the Long-Term Impacts of COVID on Physical Security

The world has changed. The once-in-a-century pandemic that we have been consumed with for the past 3-years has changed several aspects of the way we live and work. COVID has changed the way that industries operate and the way that businesses think. All this has had a transformative impact on real estate and the development […]

Subscribe to the Newsletter & get all our Articles & Research Delivered Straight to your Inbox.

Please enter a valid email

Please enter your name

Please enter company name

By signing up you agree to our privacy policy