Recent reports of Honeywell’s intention to strike a deal with UTC that did not see light of day strengthen market speculations on more M&A activities in the security industry.
Mergers and acquisitions (M&A) in the security industry have been grabbing headlines in the recent months. Close on the heels of
Johnson Controls’ merger with
Tyco, reports revealed United Technologies was in talks on a deal with
Honeywell International over the past year, but pulled out due to regulatory concerns.
Had the deal gone through, the result would have been a mammoth conglomerate with combined revenue of over US$90 billion and an overarching presence across different sectors including physical security. Such prospects could have given rise to doubts on the deal passing the antitrust review. Even if it did in the U.S., it wouldn’t take a skeptic to remember the ill-fated deal between United Technologies and General Electric that failed to go through the European Commission in 2001.
This may not be the end of the story though, as Reuters reports the two companies have been exploring merger possibilities since 1993. Moreover, Honeywell has said it doesn’t see regulatory process as a material obstacle to the transaction. What is more important, however, is that these talks were revived last year, a strong indication of the fact that companies are actively looking at options to tie up and strengthen their market presence.
In early February, Honeywell had entered into an agreement to buy the smoke detection and video security company
Xtralis for $480 million from funds advised by Pacific Equity Partners and Blum Capital Partners. After the acquisition, Xtralis would become a part of Honeywell Security and Fire, which is a part of its automation and control division that covers about a third of its revenue. The deal is expected to close in the second quarter.
Xtralis’ smoke detection solutions secure several large companies, iconic sites and critical infrastructure. The company pioneered the development of very early warning technology that can detect smoke in a facility at an early stage of a fire, which gives emergency responders additional time to help prevent or minimize damage. Headquartered in Dublin, Ireland, it has employees across Europe, Middle East, Africa, Asia Pacific and the Americas, and over 30 years’ experience in the security field.
Honeywell expects the deal to boost its presence in the market of providing security to critical infrastructure and high-value assets.
“The acquisition of Xtralis will enhance Honeywell’s very early warning smoke detection portfolio, and bring unique capabilities in remote visual verification of fire and intrusion risks, advanced perimeter security technologies and video analytics software,” said Bruce Eric Anderson of Honeywell Automation and Control Solutions. “Xtralis strengthens Honeywell’s Security and Fire portfolio for critical infrastructure and high-value assets, and will benefit from Honeywell’s global scale and channels.”
The acquisition could also indicate Honeywell’s strategy for growth at the moment, since its recent profits had come from reduced costs rather than higher sales. Profits for the quarter ending December 31 were up 24.9 percent as expenses dropped 8.6 percent, while revenue fell 2.8 percent.
In the markets, speculations abound on which company would make the next move to join hands. A step from any of the major security manufacturers will have significant ramifications for the concerned distributors and systems integrators. M&As are an unavoidable part of modern businesses, the only question would be who comes out with the winning hand.