The Most Overlooked Side Effect of Security’s Surge in Mergers & Acquisitions Activity
The suits are finally starting to recognize the appeal of investing in security. But what underlying impact is it having on the industry and the groups that have helped it grow?
THE beginning of this year marked an onslaught of mergers & acquisitions unlike any the electronic security industry has ever seen – certainly the most I have witnessed during my nearly two decades in the business. Such a flurry of M&A generates a buzz, but it also brings questions and trepidation.
Ultimately, there is reassurance in realizing security’s increased appeal to investors today. It’s taken a while, but Wall Street now sees the value in an industry with uncommon stability, rising global demand and need, central role in converging technologies and the Internet of Things (IoT), recurring revenue opportunities, ongoing innovations and upgrades, and enormous untapped pool of prospects. The suits finally recognize security’s substantial upside.
Owners and higher-ups in dealer and integrator companies tell me they love to see consolidation among their ranks. They say it thins the provider herd and creates larger, faceless competitors unable to serve customers as personally or swiftly as they can. The provisional qualifier is the assumption of being fundamentally sound and well managed; a threat could loom for those not minding the store. On the flipside, manufacturer consolidation is one of their biggest headaches. They say it can weaken relationships and/or bring about product line chaos. As an aside, it’s also a thorn in the side of publications like SSI as those merged vendors also typically consolidate their marketing spend.
Lost to most amid this M&A melee is its potential to significantly impact the electronic security industry’s valued and dedicated trade associations. When companies are combined, management usually reevaluates all expenditures and redundancies, ultimately looking to streamline. Much in the same way recently united firms may reduce or eliminate ad dollars, they also tend to cut back or withhold contributions to causes or trade groups. Left unchecked, this could prove costly to the industry in a way well beyond mere dollars.
“We recognize that as these companies get absorbed two things happen. One that directly affects us is contributions,” says Security Industry Alarm Coalition (SIAC) Executive Director Stan Martin, an SSI Industry Hall of Famer. “Half the time it is money lost. Whatever each company used to give us is usually reduced to one or another amount, rather than combining the past total. Thus we lose funding. But we can also lose, especially at the national level, lobbying efforts – involvement fighting bad ordinances, nonresponse and so forth.”
Top 6 SIAC Supporters (2015)
- Honeywell Security — $150K
- Security Industry Association (SIA) — $150K
- ADT — $105K
- Tyco Integrated Security — $105K
- Comcast — $50K
- DSC — $50K
Only around 80 of the industry’s thousands of firms donated the $940,000 that allowed SIAC to operate in 2015. More widespread contributions are needed.
As the industry’s largest installation and monitored services provider, ADT has long been one of the top contributors to the trade associations and important causes, including the entirely donor-supported SIAC (see list). So when that business was recently acquired and combined with Protection 1 and ASG Security, it induced considerable anxiety for Martin and the organization. Fortunately, for SIAC and the industry, the new Protection 1 stepped up, Martin says. “We hope in these and future acquisitions the companies involved consider that there are really only a handful of firms that fund all these efforts around the country.”
The shifting landscape is affecting member-supported trade associations as well, both at the national and state levels.
“Consolidation does lead to member attrition,” says Central Station Alarm Association (CSAA) President and SSI Hall of Famer Pam Petrow. “However, we keep a constant focus on improving value to attract new members and entrants. A side effect is the impact on volunteers as consolidated companies frequently downsize, making these resources scarcer for participation on industry efforts.”
Connecticut Alarm & Systems Integrators Association Executive Director Pat Shea Remes offers, “Membership has shrunk 25% the past four years. And the consolidation of manufacturers has had a severe impact on revenue. Where we once had four to five vendor companies, management has consolidated to one membership for all different brands.”
It is near impossible to overstate the crucial role our trade associations play in propelling the industry forward and looking out for its best interests. They have been there for you and your business countless times. Let’s keep it that way. More than ever in these rapidly changing times, security professionals must do their part. Don’t delay: join, participate and donate what you can.
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