Supplier Buyouts Are Positive Over Long Term

Is bigger better? In the security industry, the answer to that question is a definitive “maybe.”

In recent years, the merger and acquisition trend in the manufacturer/supplier side of the industry has been characterized by larger, diversified corporations purchasing major players in the alarm business. Hence, these security product manufacturing companies, which are often among the recognized leaders within the security industry, become a cog in the wheel of larger companies that do not base a substantial part of their revenues in the security industry.

Is this good or bad? Over the long term, I believe it’s positive for the industry. If you believe the futurists, the technology “big picture” will eventually make the security industry just one aspect of a giant interconnection that I call “socialnet.”

Socialnet means every aspect of our lives will be intertwined electronically, including our daily newspaper, credit card information, phone service, medical records and alarm interface. All of this data will be exchanged to allow service industries to cater to our individual needs.

When a large conglomerate buys out your product supplier, the acquisition will likely lead to opening up your installed base to a multitude of new services and, more importantly, new revenue streams for you. These buyouts enable the manufacturers, and ultimately the dealer, to provide complete turnkey security solutions, from access control to cctv to burg and fire … all in one. Moreover, the scope of security systems can more easily be broadened to include biometrics, Internet, phone service and a multitude of other customer-oriented services.

In the short term, the corporate culture of a purchased company faces a radical change when a buyout occurs, especially if the “buyee” is a private entity accustomed to reporting to CEOs vs. shareholders. Public companies must become “stockwatchers.” Sometimes, a mega-company’s stock price will fall for reasons totally disassociated with the security business. However, a precipitous drop in price has a ripple effect on the security arm, even if that unit is stronger than ever.

But overall, the long-term prospects for that “buyee” are stronger in engineering, marketing, financing and many other areas. So the next time you read about a buyout, don’t worry.

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