Had Tyco come into play then it is highly likely that Schneider would have had to fight off Honeywell Security, Siemens Building Technologies and UTC Fire & Security, but all of these companies have a major overlap in both fire and security. While that does not obviously rule them out they would need to divest a significant part of this business in order to make the acquisition commercially viable. The deal would therefore be less attractive to them. In addition, Honeywell and Siemens would have been scrutinized by the European Commission with regard to market share implications in the fire detection market.
It would appear that Tyco would not be adverse to a merger or acquisition so expect more rumors in the next nine months.
There were no major deals this month but Tyco (ADT Security) scored again with the purchase of Proximex, a PSIM supplier; following last month's purchase of Signature Security which they purchased from Oceania Capital Partners Limited for $171 million.
April recorded two major investments, but as always alliance arrangements continued to be buoyant with some nine identified, bringing the total number to 33 for the first four months of this year.
The most encouraging feature of the business is reflected in the financial performance of security players. The fourth quarter 2010 and first quarter 2011 financial announcements made recently show for the most part revenues and profitability well up on the same quarter of 2010 and the full year outperforming 2009. With almost all anticipating improved trading conditions in 2011, it looks as though revenues and profitability will improve on 2010.
The star performers in 2010 include Axis Communications, Mobotix, Basler, China Security & Surveillance, Authentec and Bio-Key, despite the fact that their fourth quarter was well down on 2009. These companies are very specialist and perform in the high growth areas of the business and / or strong in geographic markets that performed well in 2010.
Tyco, Honeywell and Siemens all increased both profitability and growth and are bullish about 2011. Cooper and Ingersoll Rand similarly increased their growth and profitability, whist Bosch Security Systems returned to profitability on increased sales.
With trading conditions looking buoyant and the drivers that accelerated consolidation and investment in 2010 still well in place we expect that the slowdown of acquisitions and funding in the first four months of 2011 does not indicate in anyway a correction but is just a short term deviation and 1 major acquisition would bring consolidation well back on course.