Here’s Why the Security Industry Can Expect a Healthy 2018
The news has been dominated by stories of volatile societal influences, but they may be one reason why the security industry is going stronger than ever.
I was asked to predict what the alarm industry can expect in 2018 regarding legal issues. Problem is that I’m writing this in the tail end of 2017 and there are so many volatile issues bouncing around we all could use a fortune teller on staff.
Taxes are of course on everyone’s mind, and the sexual predator issue sweeping the country is on many people’s minds, the immigration issue and refusal to accept the last presidential election are also on some people’s minds.
The alarm industry does not operate in a vacuum; by and large it is influenced by all the same factors that affect other business sectors. The good news for the alarm industry appears to be that the economy seems strong and we can likely continue to see activity with mergers and acquisitions.
This won’t just affect the big boys but will drive up the value of alarm companies. We’ve seen some stagnation in valuation the past few years, though the market remained fairly consistent in the 35 to 40 times RMR range.
A stronger economy may help raise the multiple, especially if there is a continuing interest in the alarm industry, with its RMR model, by the financial industry. A lot of alarm “guys” started out in the 1970s and it’s time to sell.
That may actually be a new factor, because I almost wrote “it’s time to think about selling,” but I think “it’s time to sell” is more accurate. Let’s see if there are more mergers and acquisitions this year. I know the brokers would love that.
We know the alarm industry can’t operate without general liability insurance with errors and omission coverage. That insurance has been available for years now and premiums are somewhat competitive.
Because of the industry’s reliance on strongly worded contracts favorable to the alarm industry that are enforced by the courts, the insurance industry has been able to maintain relatively low premiums, at least relative to other industries.
However, legal challenges to the contracts are increasing and even the best built dam suffers cracks. If carriers aren’t diligent with their alarm programs and focus on protecting the legal precedents that have developed during the past 40 years, the alarm industry may experience a dearth of carriers willing to continue with an alarm program.
I think we are going to be OK in 2018, but this is a dangerous trend that should be checked. How the many issues facing the country will affect the alarm industry is anyone’s guess. Taxes are up in the air as I write this article. One CEO after another is getting fired for conduct as old as 30 years ago.
Immigrants are leery about showing up for work for fear of being arrested and deported. The Federal Reserve is changing leadership and possibly direction, something the hedge funds considering investing in the alarm industry are probably watching a lot closer than the rest of us.
The times are a-changing, and that bodes well for the alarm industry. Social issues and technology are converging; the need for more security and technology seems to advance almost weekly.
Just the other day I saw a news broadcast where outdoor cameras were promoted to keep thieves from stealing boxes and packages left by online vendors. Thieves follow the truck and mail deliveries, run up and steal the packages. This kind of free promotion benefits the alarm industry; it promotes the need for more security.
This year, 2018, promises to be better than 2017. We live in fast-paced world, and it’s getting faster and requiring more, not less, security. Alarm manufacturers are more than up for the challenge, and alarm dealers need to keep pace and grow with the times.
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About the Author
Ken Kirschenbaum, SSI Contributor
Security Sales & Integration’s “Legal Briefing” columnist Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.
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