The Best and Worst Performing Security Stocks of 2018
A brutal 2018 that cut across a broad swath of Wall Street didn’t leave publicly-traded electronic security companies unscathed, despite overall industry growth.
2018 M&A Overview
The security industry continues to maintain robust M&A activity. The first three quarters in 2018 were especially active, slightly outpacing the number of transactions consummated during the same period in 2017. The following highlights some of 2018’s marquee deals by industry sector.
Access Control
- United Technologies Corp. (NYSE: UTX) subsidiary Lenel acquired access control manufacturer S2 for undisclosed terms to augment its strong market position.
- Allegion (NYSE: ALLE) acquired IP access control manufacturer ISONAS for undisclosed terms to offer more IP wall-based choices and drive electronic adoption across the access control industry.
- HID Global acquired Crossmatch, a leader in biometric identity management and secure authentication solutions, for undisclosed terms.
- Holding company ACRE acquired Open Options, a leader in open platform access control solutions.
Alarm Monitoring
- ASSA ABLOY (OM: ASSA B) acquired HKC, a leading manufacturer of alarms and Cloud-based monitoring solutions for ~$22 million.
- GreatCall, a provider of mobile phone and connected health services to seniors, was acquired by Best Buy (NYSE: BBY) for $800 million.
- SAFE Security was acquired by AAA Northern California, Nevada and Utah (AAA NCNU) for undisclosed terms.
- With private equity backing from The Riverside Co., NMC joined Netwatch (Ireland), CalAtlantic (U.S.) and Onwatch Multifire (United Kingdom) to form Netwatch Group.
- Canadian telecom giant BCE (NYSE: BCE; TSX: BCE) acquired AlarmForce Industries for $182 million, paid in a combination of cash and BCE common shares.
- EverCommerce, a service commerce platform, acquired and combined Bold Technologies and Perennial Software for undisclosed terms.
- Valcom, a provider of emergency communication systems, acquired Keltron Corp., a provider of life-safety event management systems, for undisclosed terms.
Cybersecurity
- ADT acquired Internet security firm Secure Designs (SDI) for undisclosed terms to boost its cybersecurity services portfolio.
- Cisco Systems (Nasdaq: CSCO) acquired Duo Security, a Cloud-based security vendor, for $2.4 billion.
- Bomgar Corp. acquired BeyondTrust Software for $625 million to build out its comprehensive privileged access management service and endpoint protection solutions.
- AT&T (NYSE: T) acquired AlienVault for $600 million with the goal of expanding its unified security management and threat intelligence service for business customers.
- Fortinet (Nasdaq: FTNT) acquired Bradford Networks as part of a rollout strategy to extend segmentation and security to the edge of enterprise-level networks.
Home and Building Automation
- Amazon (Nasdaq: AMZN) acquired smart doorbell maker Ring for $993 million.
- Nortek Security & Control acquired IntelliVision Corp., a pioneer and leader in artificial intelligence (AI), smart cameras and deep learning-based video analytics software, for undisclosed terms.
- Hellman & Friedman acquired a controlling interest in DIY home security company SimpliSafe. Terms of the transaction were not disclosed; however, news reports valued the company at about $1 billion.
- AMETEK , a global manufacturer of electronic instruments and electro-mechanical devices, acquired Telular Corp., the parent company of wireless alarm communication solutions provider Telguard, for approximately $525 million.
- Identity KPMG acquired the identify and access management business of Cyberinc for undisclosed terms to enhance KPMG’s talent and resources in the rapidly expanding enterprise identity and privileged user management markets.
- Allstate Corp. (NYSE: ALL) acquired consumer identity protection provider InfoArmor for $525 million, strengthening the insurer’s security fabric.
- TransUnion (NYSE: TRU) acquired iovation, a provider of fraud prevention and identity authentication solutions for undisclosed terms.
Systems Integration
- ADT acquired Red Hawk Fire & Security, a leader in commercial fire, life-safety and security services for $317.5 million. The transaction accelerates ADT’s growth in the commercial security market and expands its suite of fire safety solutions. ADT also strengthened its commercial portfolio with deals for San Francisco-based Acme Security Systems and Aronson Security Group (ASG) of Renton, Wash.
- Ares Management Corp. acquired Convergint Technologies for undisclosed terms. Convergint itself completed nine additional acquisitions in 2018 to support further market consolidation.
- Securitas completed its $70 million acquisition of the Public Safety & Security (PSS) division of Kratos Defense & Security Solutions.
Video Surveillance
- Arecont Vision was acquired for $11.3 million by Costar Technologies for its video surveillance platform as Costar transitions from a value-added OEM product company to a manufacturing and design company.
- Canon (NYSE: CAJ) acquired Brief-Cam, a provider of widely used rapid video review, search and analysis technology, for undisclosed terms.
- Motorola Solutions (NYSE: MSI) acquired Avigilon (TSE: AVO) for $1 billion to bring advanced surveillance and analytic capabilities to the rapidly evolving public safety workflow, while also expanding new products and technologies for commercial customers.
- Qognify, backed by Battery Ventures, acquired On-Net Surveillance Systems (OnSSI) for undisclosed terms to augment its video management system (VMS) offering.
- FLIR Systems (Nasdaq: FLIR) completed a sale of its Lorex subsidiary to Dahua for approximately $29 million in cash.
Thomas McConnell is Managing Director of Capstone Headwaters, an independent, middle market investment banking firm based in Denver.
(*) The physical security and cybersecurity public stock indices have been compiled by Capstone
Headwaters from the following sources: Memoori, “The Physical Security Business, 2018 to 2023”;
S&P Capital IQ, “ETFMG Prime Cyber Security ETF (ARCA: HACK),” accessed Jan. 23, 2019.
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