The Best and Worst Performing Security Stocks of 2017
SSI’s annual summary takes a look at the strong performance of publicly-traded electronic security companies in 2017. The solid run follows a comparable ascending market sector posted the previous year.
Underperforming Security Stocks
Anixter (NYSE: AXE)
- 6.2% stock price decline, $81.05 to $76
- EV/EBITDA declined from 10.6x to 9.5x
- The company expects 2017 revenues to increase by 3.5%, with EBITDA to climb by 4.7%
Ascent Capital Group (Nasdaq: ASCMA)
- 29.3% stock price decline, $16.26 to $11.49
- EV/EBITDA remained relatively constant for the year moving from 6.1x to 5.9x
- Revenues fell by an estimated 2.3% to $557 million. EBITDA fell slightly from $311 million to $309 million. At the end of 2017, Ascent had debt of approximately 5.6x EBITDA.
CyberArk Software (Nasdaq: CYBR)
- 9% stock price decline
- EV/EBITDA declined from 30x to 20.6x
- Revenues grew by 18.6% to $257 million, and EBITDA by 32.8% to $56 million.
F5 Networks (Nasdaq: FFIV)
- 9.3% stock price decline
- EV/EBITDA declined from 14x to 8.7x
- Revenues grew in 2017 by just 3.2% while increasing EBITDA by 35.8% to $829 million.
Gunnebo
- Stock price decline, $4.25 to $4.12
- EV/EBITDA increased from 7.2x to 8.7x
- EBITDA declined by 15.4% to $50 million. For the year revenues increased by 9.3% to $733 million.
IndigoVision (LON: IND)
- 25.2% stock price decline, $2.05 to $1.53
- EV/Revenue decline from .2x to .1x
- Revenue declined from $46 million to an estimated $43 million as EBIT-DA turned negative in 2017 as well.
Johnson Controls (NYSE: JCI)
- 7.5% stock price decline, $44.19 to $38.11
- EV/EBITDA multiple decreased from 14.7x to 10.4x
- On the heels of its 2016 merger with Tyco, JCI estimates 2017 revenues of $30.1 billion
- Reported EBITDA grew by 27.4% from $3.8 billion to $4.8 billion
2017 Security M&A OVERVIEW
In 2017, mergers and acquisitions activity remained robust in the security industry. What follows is a selection of notable transactions by industry sector.
Access Control
- HID Global acquired Mercury Security, an open platform OEM leader. Despite this noteworthy acquisition, the stock price for parent company ASSA ABLOY (STO: ASSA-B) remained relatively unchanged through out the year, increasing by just .29% during the 12-month period.
- ASSA ABLOY purchased smart lock-maker August Home to double down on new technology
Fire/Life Safety
- Potter Electric Signal Co. was acquired by Gryphon Investors following an undisclosed majority investment in the manufacturer
- Honeywell acquired Italy-based SCAME Sistemi to add new fire and gas safety capabilities to its portfolio of connected building solutions.
Video Surveillance
- Delta Electronics (TPE: 2308) acquired one of largest remaining independent video surveillance companies, Vivotek, for $200 million.
- Eagle Eye Networks acquired Panasonic Europe for $15 million to expand its geographic footprint.
Identity
- Oberthur acquired Safran Identity for $2.7 billion as it continued to build its identity business.
- Gemalto (AMS: GTO) acquired 3M’s identity unit for $850 million in another significant identity sector transaction.
- IdentiSys acquired Automated Card Systems (ACS) of Canonsburg, Pa., for undisclosed terms. The deal included ACS’s eastern division, based in Havertown, Pa.
Systems Integration
- Private equity backed Convergint Technologies continued its system integrator consolidation effort as it completed its 14th acquisition within 24 months in December 2017 with the purchase of Genesis Security.
- ADT acquired three security systems integrators in 2017, including Gaston Security, MSE Corporate Security and Protec, as it built out its integrated solutions division.
Cybersecurity
- ID Watchdog was acquired by Equifax (NYSE: EFX) for $63.5 million in a consumer identity theft protection sector deal. This transaction came on the heels of the acquisition of consumer identity theft protection provider LifeLock by Symantec (Nasdaq: SYMC) for $2.5 billion.
- Honeywell acquired cybersecurity company NextNine in a deal high-lighting the convergence of physical and IT security.
- ADT continued to build out its portfolio of IT security services with a deal for Datashield, a company that now operates under the brand ADT Cybersecurity.
Alarm Monitoring
Canadian telecommunication and media company BCE acquired AlarmForce for $202 million or 3.9x revenue.
Home and Building Automation
- Alarm.com acquired iControl Networks for $148.5 million.
- Amazon (Nasdaq: AMZN) acquired connected WiFi home video camera and doorbell provider Blink.
- ipDatatel and Resolution Products struck a merger agreement for undisclosed terms.
- Nortek Security & Control and Core Brands merged into one integrated group for undisclosed terms.
- PSA Security Network acquired USAV, a team of professional audio-visual (ProAV) integrators. USAV’s affiliate CI Edge, a buying group designed to support middle market commercial technology integrators, was also acquired as part of the transaction.
Thomas McConnell is Managing Director of Capstone Headwaters, an independent, middle market investment banking firm based in Denver.
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