The first quarter results analyzed on Memoori, a site providing information involved in security industry, entitled “The Physical Security Industry in 15 Minutes” showed that both consolidation and investment had slowed down significantly. In the first quarter of this year the number of acquisitions was 20-percent down on the same period of 2010 when Tyco made a US$2 billion acquisition of Broadview Security.
The first quarter results analyzed on Memoori, a site providing information involved in security industry, entitled “The Physical Security Industry in 15 Minutes” showed that both consolidation and investment had slowed down significantly. In the first quarter of this year the number of acquisitions was 20-percent down on the same period of 2010 when Tyco made a US$2 billion acquisition of Broadview Security.
This was a disappointing start to 2011, but Reuters broke the news that Schneider Electric was mulling the possibility of acquiring Tyco International. This startling news opened up the possibility of realizing a $30-billion deal, by far the biggest ever in this industry; having major implications particularly for the other suppliers in the distribution chain.
Within days every analyst and pundit had reviewed the implications from all angles most commenting that this daring strategy could work but that it was risky. Schneider quelled speculation that the company was exploring acquiring Tyco International, saying it prefers smaller deals and that there would be no large scale transaction in 2011.
There can be no doubt that Schneider had been taking a serious look at this potential acquisition but the shareholders and financial community did not like it and the board have been forced to call a halt. The risk is that this acquisition would have stretched their finances too far, which overruled the strategic benefits of driving their security business to the top of the league while at the same time providing them with a global market leading fire safety business. Both of these businesses have proved to be robust and have grown during the world recession.
So strategically this is an opportunity lost, for Tyco would fit in well with Schneider's existing security / safety structure. There is no duplication with Tyco's Fire Detection & Extinguishing business and surprisingly little overlap with their physical security business. Schneider's strength is in the video camera surveillance market in the commercial sector acquired through its purchase of Pelco in 2008 and has a strong business in systems integration through a number of acquisitions that made up Tour Andover Controls. Tyco through the ADT operation is strongest in the residential market and Schneider does not play in that market apart from low-voltage equipment.
The residential market for security is expected to play a major role in bringing together home area networks, energy management and its interface with the automatic metering infrastructure a rapidly growing part of the smart grid. This new business would offer very significant longer term prospects for organic growth.