2013 M&A Activity in Review
Despite overall weak mergers & acquisitions (M&A) activity throughout much of 2013, largely due to market uncertainty, there were several large transactions that got done. Here’s a glance:
- Tyco Int’l paid $150 million in cash for Exacq Technologies
- Avista Capital Holdings acquired Telular Corp. for $263 million
- Monitronics Int’l acquired Security Networks for $510 million
- ADT acquired Devcon Security Services from Golden Gate Capital for $150 million
- Linear, a subsidiary of Nortek Technology Solutions, bought 2GIG Technologies for $135 million
- Avigilon snapped up VideoIQ for $32 million
- Gentex Corp. purchased the HomeLink product line from Johnson Controls for $700 million
The current valuations for HID Global and Allegion are considered high at 20x to 21x estimated 2014 earnings; they will probably grow their topline in the 2% to 5% range, and their bottom in the low teens. The respective stocks continue to be strong despite the high valuations because investors are looking out two or three years and seeing continuing improvement in the economy. Investors also see continued increase in the percentage of business that is going toward high-end electronic locking and identity and access solutions.
The firms in this sector experienced virtually no organic growth during the recession, and a couple years thereafter. Organic growth did not return to the sector until the third quarter of 2013. That was a big boost to the stock prices of all companies in the sector. Despite the absence of growth in traditional locks, Imperial Capital forecasts the overall lock segment will grow by 1% to 2% over the next two years, as a result of future growth in smart locks. This growth will likely come via remodeling of existing and new construction.
Overall, signs are quite positive for modest to significant growth in 2014 on the manufacturing side of the security industry, depending on the market specialization. For dealers and monitoring firms, the outlook is perhaps even stronger with not only attractive growth potential but also higher multiples as company owners can take advantage of what continues to be a seller’s market due to strong demand and favorable capital market conditions.
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Mergers & Acquisitions