How Alarm.com Nearly Thwarted the ipDatatel, Resolution Products Merger

ipDatatel and Resolution Products, two rising stars in security and home automation, have merged, in a deal that competitor Alarm.com (Nasdaq: ALRM) fought to kill. Get all the details of the merger here.

Alarm.com, a $2 billion leader in SHaaS (smart home as a service), filed for a temporary restraining order last month to halt the deal because it was being backed by former Alarm.com chairman Ralph Terkowitz and his private equity firm ABS Capital Partners Inc.

ABS created Alarm.com in 2009 with the acquisition of MicroStrategy, and at one point owned 80% of the company and controlled three of its five board seats.

In its complaint, Alarm.com argued Terkowitz and team had a “front-row seat” in the Alarm.com theater and would use their inside knowledge to compete unfairly against their former property, according to Law360.

The Delaware Chancery Court disagreed, and allowed the deal to go forward.

While the press release for the ipDatatel/Resolution merger makes no mention of ABS, a spokesperson confirms that the group in fact made an investment in the combined company, and details will be disclosed at a later date.

Resolution Products makes a line of professionally installed security systems and peripherals such as wireless sensors. As such, it doesn’t really compete directly with Alarm.com.

ipDatatel, on the other hand, provides services similar to Alarm.com’s — taking security and home automation signals from the household, parsing them in the cloud, and dispatching emergency services as necessary.

If not for the involvement of ABS, the merger of ipDatatel and Resolution Products merger might go largely unnoticed outside of the smart home niche.

While ipDatatel might be an up-and-comer in the SHaaS business, they are miniscule compared to Alarm.com and competitor Icontrol, which was acquired by both Alarm.com and Comcast earlier this year.

ABS, however, makes this deal particularly interesting, given its track record with Alarm.com, as well as the big gaping hole in the SHaaS market left by Icontrol’s dissolution.

There’s one other thing that makes this deal seem especially promising. Alarm.com and Icontrol own a huge chunk of the intellectual property associated with cloud-based integration of security and home control. Virtually every respectable competitor, including ipDatatel (as of last month), has been sued for patent infringement.

When asked about the lawsuit yesterday, ipDatatel CEO Russell Vail told me he believes his technology does not infringe.

Indeed, it would seem unwise for ABS — which knows a thing or two about Alarm.com IP — to green-light the investment if it thought ipDatatel infringed.

How ipDatatel Does SHaaS Different

In the realm of security monitoring and SHaaS, ipDatatel has one big thing going for it: It was late to the party.

Launched just three years ago, the company makes IP-based communication systems (“alarm communicators”) that bridge security systems with central monitoring stations. ipDatatel entered the business when competitors were still making communicators based on POTs (telephone lines) and 2G cellular communications.

The sun was setting on 2G when ipDatatel came to the industry with an “IP first” mentality — transmit alarms over IP first, and then use cellular as back-up if necessary.

Some security and SHaaS providers such as Alarm.com only communicate with security systems via cellular.

The problems with cellular are (at least) two-fold, according to Vail. First, consumers have to pay for it.

“Why not use the communication channels that consumers are already paying for?” he asks.

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Second, cellular services will keep on changing. Just like the sun set on 2G, it will set on 3G, forcing the change-out of radios on millions of security systems.

“There’s no sunset for the Internet or IoT,” Vail says. “Alarm dealers don’t have to worry about the sunset loop as long as IP is primary.”

Resolution CEO Brian Seemann adds that IP makes sense as a primary communication method with the security provider because it’s the primary protocol inside the home.

“The common fabric is IP connectivity,” he says. “It makes sense to connect directly to the internet, not from cell to Internet.”

Resolution Products built its Helix security/automation system from the ground up as an IP-communicating device, Seemann notes: “It’s a security system that looks like a router.”

While other SHaaS providers offer IP-based communications, ipDatatel says its build-out is unique, with at least five network operating centers distributed throughout the country for redundancy and speed.

Vail says the average alarm-system message is delivered in 38ms over the ipDatatel network: “It’s blindingly fast.”

ipDatatel will continue to partner with third-party alarm system manufacturers; Resolution will continue to support other SHaaS providers including its launch partner SecureNet.

Together, the companies will market their systems to traditional security dealers, as well as mass-market providers such as ISPs.

Editor’s Note: The following story first ran in Security Sales & Integration’s sister publication CE Pro.

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