Some ADT-FirstService analysis

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04/15/2008
At first blush, I thought the ADT purchase price for FirstService's security business was something of a steal. They paid (an announced) $187 million for a business that did roughly $200 million in revenue last year (theoretically - it's not broken out on FirstService's financials). So, less than 1x 12 months trailing revenues, that's pretty good, I'm thinking. But then Frank Brewer said that only about 10-11 percent of that revenue was service-based. So, that's $22 million on the high side, which is just $1.83 million of RMR (theoretically - hard to know what of that is contracted and what is one-time fees). So, if you calculate as a multiple of RMR, you've got $187m/$1.83m of RMR, which leaves you with a multiple of 102x. Obviously, this isn't an RMR-based business, and ADT is keeping the management (FirstService Security CEO Frank Brewer will be the head of a new integration division at ADT) and a lot of clients and expertise, but there's still no guarantee that SST and Intercon will continue to create new business at their past rates, and there's likely to be at least some attrition in the sales and engineering forces, as there can be during an acquisition. Now I kind of wonder if ADT overpaid a bit, especially in this economy. Money people, feel free to tear me down.