Alarm Funding Associates bought by broadcast giant

Tuesday, January 1, 2008

EXTON, Pa.—Alarm Funding Associates, a security funding and acquisition company that purchases maintenance contracts from alarm companies, announced on Nov. 14 that television broadcasting company Sinclair Broadcast Group has purchased 95 percent of the company for $5.5 million.
Sinclair, which reported $715 million in revenue for the 2006 fiscal year with net income of $54 million, reaches approximately 22 percent of U.S. television households.
“This is our first venture into security,” said David Amy, executive vice president and chief financial officer of Sinclair Broadcast Group. “We have a number of feelers out, in regards to looking for business opportunities … Alarm Funding Associates is a cash flow business. We’re a cash flow business. So the fundamentals of what we like and what kind of business they are matched up well.”
Amy said Sinclair is not looking to make changes and “management will absolutely stay the same, that’s why we made our investment in Alarm Funding Associates.”
Jessica Richardson, a director with analyst firm Security Performance Partners, agreed that this investment is a good match for both companies and said the partnership is not as unusual as it may initially appear.
“Communication companies are used to generating revenue based on a contractual basis, which is why they probably like the alarm industry. The predictability of cash flow [is similar],” Richardson said.
This investment is beneficial for Alarm Funding Associates for two reasons, said Richardson. “It’s advertising [and AFA] can now make a public announcement that [it’s] sufficiently capitalized to grow its business and attract new dealers and it can also execute [its] business plan without having to worry about raising equity.”
Overall, Richardson said the investment is a good sign for the industry. “Any time you get new entrants into the market with this amount of capital, it’s a good thing, since it’s definitely a capital-scarce industry,” said Richardson. “There are many equity sponsors who are interested in getting into the industry, but it’s finding the right acquisition [that’s difficult].”