Alarm Funding Associates bought by television broadcast giant

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Wednesday, November 21, 2007

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.
Alarm Funding Associates will continue to be managed by its current management team following the investment, according to a statement released by Sinclair.
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.
Jessica Richardson, a director with analyst firm Security Performance Partners said this investment is a good match for both companies and the investment 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.
Representatives for Sinclair and AFA could not be reached for comment by press time.
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 [its] sufficiently capitalized to grow their business and attract new dealers and they 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]."

For more on this story, please see the January issue of Security Systems News.