With several merger and acquisition deals happening in security of recent, another one took place: ADT, a security solutions provider for homes and businesses, announced on February 16 it has been acquired by private equity firm Apollo Global Management, which will merge it with Protection 1, another home and commercial security company. The deal is worth nearly US$7 billion.
With several merger and acquisition deals happening in security of recent, another one took place: ADT, a security solutions provider for homes and businesses, announced on February 16 it has been acquired by private equity firm Apollo Global Management, which will merge it with Protection 1, another home and commercial security company. The deal is worth nearly US$7 billion.
Apollo, which owns Protection 1 parent Prime Security Services Borrower LLC, will pay $42 per share of ADT, a premium of nearly 56 percent over ADT's $26.87 closing share price Friday. The combined company will retain the ADT name and remain headquartered in Boca Raton, Florida.
Timothy J. Whall, President and CEO of Protection 1, will be the CEO of the combined business following the closing of the transaction. “The combined company will be a market leader with a powerful brand and scale resulting in an enhanced overall customer experience,” he said in a press release announcing the merger.
“This transaction represents a highly attractive premium for ADT’s shareholders,” said Naren Gursahaney, President and CEO of ADT, in the same release. “We’re proud to have strengthened the quality of our customer base, improved service and retention, and extended our leadership in innovative solutions such as our ADT Pulse platform and our new security-as-a-service offering, ADT Canopy. By combining Protection 1 with ADT, we will be better positioned to expand the breadth and depth of the services we offer to our customers throughout the United States and Canada.”
Targeting commercial sector
A major objective of the merger is to leverage Protection 1’s success in the commercial market that ADT, formerly part of Tyco International which spun it off as an independent publicly-traded company in 2012, wants to make further inroads into.
Moving into the commercial sector has become quite urgent in the midst of more intense competition in the residential segment. According to USA Today, in the U.S., traditional players such as ADT and Honeywell have seen the arrival of fairly recent entrants such as AT&T, Comcast, Time Warner Cable, and Verizon. At the same time, Google markets its own Nest Cam security camera and home networking products.
“Protection 1’s robust commercial presence will speed ADT’s expansion into the commercial sector supported by increasing commercial sales and technical skills across a well matched national footprint,” Whall said.
The combined company is also expected to benefit from more streamlined operations. Both ADT and Protection 1 have numerous branch offices throughout North America. The consolidation of these offices and reduction of staff and expenses makes sense in terms of cost-savings and profit maximization.
The purchase however is not a done deal yet. While ADT's board approved the transaction, which is expected to be completed by June, there is a 40-day "go-shop" period in which ADT can look for a better deal than the one offered by Apollo.
With more competition in the security market, which has traditionally been very fragmented, it makes sense to merge with others to create synergy and leverage each other’s strengths. The one between ADT and Protection 1 is just one example, and we can expect more deals to come throughout the year.