ACRE Back in Buying Mode Once ‘Dust Settles’ From Mercury Security Divestiture

That’s the word to SSI from Joe Grillo, who discussed ACRE’s sale of the leading access control OEM business to HID Global.

DANBURY, Conn. — Access Control Related Enterprises’ (ACRE) sell-off of Mercury Security to HID Global registered significantly on the security industry M&A-o-meter.

So what was the rationale behind the deal announced Sept. 19? As ACRE Founder and CEO Joe Grillo explained to me, there were two key aspects at play here. No. 1, ACRE is primarily backed by private equity. And we all know what that entails: there is always going to be a buy and hold period, then the hopefully improved value and sell execution.

“That goes for all of ACRE or any of its parts, including Mercury,” says Grillo.

Grillo established ACRE in 2012 as a platform to consolidate acquisitions in the electronic security industry. He specifically set up the firm so that its individual assets — including Vanderbilt and ComNet — operate entirely independent within ACRE. This affords the firm lots of flexibility when an opportunity arises to divest an asset.

Serving as a leading OEM manufacturer for 22 vendor partners, Mercury Security had long attracted interest from potential buyers. Established in 1992, now with more than 4 million access control panels installed globally, ACRE acquired the Southern California-based company in 2013. Despite its continued success under the ACRE umbrella, Grillo and his team decided the moment had arrived to sell its asset and focus instead — enter sell-off aspect No. 2 — focusing on synergies between Vanderbilt and ComNet.

ComNet, acquired in 2016, is a designer of transmission and networking equipment primarily serving security and surveillance applications. Vanderbilt was created in 2012 following ACRE’s purchase of Ingersoll-Rand’s controllers business, Schlage Electronic Security. These two assets now form the core of ACRE’s portfolio.

“We started to take a look at what scenarios might evolve [from divesting Mercury] and how it might impact ACRE and the shareholders,” Grillo explains. “And then you have the fact that Mercury operates a very different business model than ComNet or Vanderbilt. It further made sense … [to] focus on the other two businesses because they share customers and channels. I am a strong believer that you can leverage opportunities there.”

Divesting Mercury has now fueled ACRE’s coffers to pursue other acquisitions or technology partnerships in a more focused environment, Grillo says.

He describes ComNet’s communication networking equipment as a growing and profitable business that exists within a much more fragmented competitor base. Those are different products than Vanderbilt’s, which are more traditional access control along with a European intrusion portfolio. Both, however, go to market through wholesale distribution and installing security contractors.

Therein lie the collaboration opportunities. Via M&A, the intent is to leverage a broader base of salespeople and larger relationships with the combined client bases. To Grillo’s point, the access control systems business is both highly fragmented and competitive in the North American and European marketplaces. Thus, potential acquisition targets are multiple.

“There are other categories of video, either maybe software or other types of hardware companies. And then intrusion alarm. We are in the intrusion alarm business in Europe and somewhat in the Asia Pacific and Middle East market,” he says. “We are not in the Americas market, so that is always a possibility.”

There appears to have been quite an eclectic mix of suitors that participated in the Mercury auction, which was led by Houlihan Lokey. Michael Morabito, director of the investment bank’s industrials group, describes a highly competitive process that attracted a large number of strategics from across multiple industries outside of security.

“The takeaway,” Morabito says, “is this transaction was one that opened the envelope in terms of buyer appetite for technology-enabled security assets beyond the traditional security scope, which is a good sign for the industry and its participants.”

Why the Transaction Makes Good Sense

The addition of Mercury within HID’s parent company, Assa Abloy, makes perfectly good sense, Bill Bozeman, president and CEO of PSA Security Network, told me. The purchase ties the firm into a large array of access control products from numerous manufacturers.

Bozeman surmises what the purchaser bought into is a robust recurring revenue stream. “They have this army of systems integrators that are selling various different access control products that use Mercury panels,” he says. “Although that revenue might not be guaranteed it is somewhat guaranteed because you have such a force out there selling these panels for you. They will want to continue to sell the recurring business, which is the panels and the cards. They have a very powerful host of offerings here.” 

Grillo, a more than 30-year veteran of the electronic security and identification industries, views HID Global to be a natural landing spot for Mercury. At Assa Abloy, he was president and later EVP of its global technologies division, which included HID, Assa Abloy Hospitality and Besam Automatic Doors.

“It doesn’t surprise me that HID was successful and I believe it really is likely the best home for Mercury going forward,” says Grillo, who confirmed the auction suitors included “more than one” Mercury Security customer.

For the time being, HID is not talking specifics about the deal. In a press release, the company’s president and CEO, Stefan Widing, stated: “Customers of both HID and Mercury Security will benefit from tighter and more seamless integration of controllers with readers and credentials, as well as from our shared vision for an open, flexible approach to access control.”

Neither the integration community nor other channel stakeholders should view the acquisition with any potential threat, Grillo says. Especially given that HID likely has existing relationships with most if not all of Mercury’s 22 customers, including Vanderbilt.

“I think they want to continue having relationships with all of the access control OEMs because they all integrate their wireless locks. All of Assa Abloy’s wireless locks get tied into the access control systems,” Grillo says. “Mercury has the ability to provide the interface to not only Assa Abloy’s locks but three other manufacturer’s locks. It doesn’t help them to say, ‘We are going to go into the systems business all by ourselves and cut off our nose despite our face,’ and have 22 very upset customers.”

And what can integrators expect from ACRE going forward? They will first “let the dust settle” from the Mercury transaction, explains Grillo, followed by an eventual return to acquisition mode.

“We will continue to develop the technology and the products that we have within ComNet and Vanderbilt,” he continues. “Mercury had a lot of loyalty by the integrators, and those who use Vanderbilt and ComNet are also very loyal and good customers. We will continue to focus on making sure we have things that meet their requirements.”

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About the Author


Although Bosch’s name is quite familiar to those in the security industry, his previous experience has been in daily newspaper journalism. Prior to joining SECURITY SALES & INTEGRATION in 2006, he spent 15 years with the Los Angeles Times, where he performed a wide assortment of editorial responsibilities, including feature and metro department assignments as well as content producing for Bosch is a graduate of California State University, Fresno with a degree in Mass Communication & Journalism. In 2007, he successfully completed the National Burglar and Fire Alarm Association’s National Training School coursework to become a Certified Level I Alarm Technician.

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