Despite marginal growth and a lack luster financial performance by suppliers across the industry in 2010, consolidation increased by 75 percent on its 2009 figure that had already picked up from its precipitous fall in 2008. Similarly new investment in the supply side also increased rapidly in 2010. So with a forecast improvement in trading conditions it was naturally assumed that the trend in both consolidation and investment would continue its upward trend in 2011 and beyond.
Despite marginal growth and a lack luster financial performance by suppliers across the industry in 2010, consolidation increased by 75 percent on its 2009 figure that had already picked up from its precipitous fall in 2008. Similarly new investment in the supply side also increased rapidly in 2010. So with a forecast improvement in trading conditions it was naturally assumed that the trend in both consolidation and investment would continue its upward trend in 2011 and beyond.
The first quarter results analyzed in the monthly Executive Brief “The Physical Security Industry in 15 Minutes” show that both consolidation and investment has slowed down significantly. In the first quarter of this year the number of acquisitions is 20-percent down on the same period of 2010 when Tyco made a US$2 billion acquisition of Broadview Security. The number of investments has halved compared with the same period of 2010.
Allan McHale, Director of Memoori, predicted at the beginning of this year that this high rate of consolidation would continue for a few years because the major suppliers absented themselves from the dealing tables in 2010, announcing that they will be active in 2011 and companies from the Defense and IT & Communications industries were expected to continue making forays into the security industry.
The drivers that accelerated the consolidation and investment process in 2010 are still very much in place. Technologies such as wireless, SaaS, network cameras, video management analytics and HDcctv are rapidly gaining market share and opening up new business opportunities.
IP networks whether for access control, intruder alarms or video surveillance are on the verge of a long strong run. Through these factors and IT convergence, the fundamental goal of achieving the buyer's ROI is becoming a reality. The defense- and IT-related companies entered the security business because of its proven robustness during the recession and the fact that it provides opportunities to leverage their high technology, which has not changed.
In the first quarter alarm monitoring acquisitions continued to make a major contribution to the consolidation process and it's expected to continue, driven by the basic need to consolidate this fragmented sector. In addition the players here want to pursue the opportunity that is opening up through integration of the different security services delivered through SaaS which is enabling a much more comprehensive and cost-effective service to both residential and commercial customers.
The most notable sale in the first quarter of this year was the Initial Public Offering (IPO) of Infinova. This US-based company listed on the Shenzhen Stock Exchange in January and got a much higher valuation than it would have got in the western world. Some 37 million shares were issued at $8.2/share, yielding a value of about $306 million.