Subscribe to

Blogs

Apollo lands Protection 1, ASG

 - 
Wednesday, May 20, 2015

Apollo Global Management is about to take one giant leap into security with its May 19 agreement to acquire Protection 1 and ASG Security.

Under the agreement, the combined companies will operate under the Protection 1 brand, with Protection 1 CEO Tim Whall at the helm.

Security Systems News reported on the proposed deal last week. Here's that story.

I had a chance to interview Protection 1 CEO Tim Whall, CMO Jamie Haenggi and ASG's CEO Joe Nuccio last night. I was looking for details about how the new management might be structured, but that will have to wait until the deal is closed. The earliest possible closing date would be July, Whall said.

The May 19 announcement did not include proposed terms of the agreement, though $2 billion has been reported by Rueters.

Whall said that the “combination of Protection 1 and ASG instantly gives both companies a wider footprint where they each did not have one and a greater density in the markets where we overlap. There is a definite benefit for the customers as well as the employees. And given our like-minded approach to the operations, the combination will be a force in the marketplace."

Haenggi added that “the combination of the two companies creates a $40 million recurring revenue and over $600 million entity, with more organic growth and acquisitions on the horizon. It has never been Protection 1’s or ASG’s goal to be the biggest—it has always been both companies aim to be the best both for our customers and our employees.”

Whall, Haenggi and Nuccio all spoke about the benefits of having a private equity group the size of Apollo (this group manages $163 billion) involved in the security industry. When Apollo gets involved, other funds take notice, Whall said.

That means more resources for Protection 1 and potentially for other security industry companies.

I spoke with Michael Barnes, a partner in the consulting and advisory firm Barnes Associates, who is advising Apollo. I asked him about the people at Apollo who are behind the deal. Barnes said while Apollo is a huge fund with many employees, "the team that has been focused on the security alarm industry and driving these deals is relatively small. They are very smart and they cycle through tough decisions quickly. They should make a great partner for P1 and ASG."

How might the group from Apollo work with managment? Barnes said, "From what we can tell, their philosophy seems to be to pick the best horse and jockey and then let them run. To extend the analogy, I am sure they will influence things like what races they enter, but as long as they are winning they will likely just focus on making sure they have the needed resources and otherwise stay out of their way."

I posed the same question to the folks at Apollo in a couple of calls last night, but they declined comment.

Whall, Haenggi and Nuccio also spoke about how the new Protection 1—with the staff, expertise and client base and geographic coverage that ASG brings—will be uniquely positioned in the industry.

Haenggi said that Apollo has been studying the industry for some time. They liked that Protection 1 has "not only has the national footprint, but also the breadth of services and markets serving residential, commercial and national accounts," she said.  "Back in the day, there was ADT that had the size and breadth. Today, there is no one serving across all of these segments with the size of Protection 1. We are in a position to take that lead but do it with a decidedly ‘Protection 1 approach’ to business."

Barnes concurred with Haenggi, saying P1, especially with ASG added, is the largest industry player with "a business model on which most of the industry was built. That is, having a large commitment to specific geographic markets and a broad range of product and services aimed at virtually the entire spectrum of customer types—everything from low-cost, entry-level residential systems, including a DIY offering, all the way up to large-scale systems for the commercial and institutional segments.

Both companies also know how to acquire and consolidate smaller companies, Barnes noted. "This robust approach is in contrast to virtually all of the other large, national players, who are more narrowly focused, such as Tyco, Stanley and Diebold on commercial markets, and ADT, Vivint, and Monitronics primarily on the residential market."

What does Tim Whall say about Protection 1's expansion plans? Will it expand beyond the U.S. market? “I think it's safe to say that Protection 1 will hold not just a U.S. footprint, but a North American footprint," he said.

Asked about possible aspirations for a global presence, Whall laughed and said: “Well, before we talk international, let’s get this deal signed first and over the line—we’ll see how international we get, but I certainly would not rule out lots of growth from Protection 1 over the next several years.”

Private equity is no stranger to security, especially in the past two years. Recent deals include: Vivint to Blackstone, SAFE to ICV Partners, ACA to Norwest Capital, and most recently, Ackerman to Imperial Capital, Barnes noted. However, this deal stands out, he said.  "I can’t remember an investor like Apollo making a first step into the industry, on this scale, doing two transactions at the same time, and particularly with such a good fit between the two."

To attract private equity investors, Barnes said you "have to have all of the requisite pieces of the puzzle…size, capability, management, and growth. In addition, you generally have to have a strong overall industry opportunity, since one is effectively competing against all other possible investment opportunities." 

The long list of dealmakers involved in this transaction include: Financing is provided by Credit Suisse, Barclays, Deutsche Bank, Jefferies and RBC. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal adviser to Apollo; Latham & Watkins LLP is acting as legal adviser to Protection 1; and Kirkland & Ellis LLP is acting as legal adviser to ASG Security. Morgan Stanley and Raymond James are acting as financial advisors to Protection 1 and Goldman Sachs is acting as financial advisor to ASG Security. Barnes Associates is advising Apollo.

Z-Wave Alliance offers its own brand of ‘Shark Tank’

 - 
Wednesday, May 13, 2015

The Z-Wave Alliance, the consortium of companies deploying Z-Wave’s wireless control products and services, has launched Z-Wave Labs, a competition to support and provide incentive for IofT innovation on the Z-Wave platform.

Winners—one chosen each month for 12 months—will receive alliance membership and IofT development kits.

“We’ve all watched ‘Shark Tank,’ ” Avi Rosenthal, an alliance board member and VP of security and control for Nortek, said in an interview with Security Systems News. The logical question was “how do we do a Shark Tank for Z-Wave,” Rosenthal said.

The group wants to hear from “passionate” start-ups and entrepreneurs who want to bring Z-Wave products to market, he said.

“The beauty of this is that there are no bounds. People have wonderful imaginations,” Rosenthal said.

The alliance will provide no financial help, but “we will assist them, we will mentor them. It’s a great opportunity for them within the alliance. We will recognize them and give them guidance. It’s like when your little brother starts college,” Rosenthal said.

According to the alliance, the competition is open to private companies of any size and to individuals 18 and older as of March 1 of this year who submit their Z-Wave product innovation through an online application. Each entrant must submit an application before the 15th of each month in order be considered for that month's contest. Applications can be for products in any IoT related industry, including residential, commercial, automotive, healthcare, energy, security and aging-in-place.

Judges will choose winners based on innovation, functionality, engineering and design style, ingenuity, breadth of applicability marketability and ease of use. Winners will be notified and announced at the end of every month and featured on the Z-Wave Labs  website and on social media. 

Each winner will receive access to the Z-Wave IoT 500 series development kits from Sigma Designs and a year of alliance membership, which provides the opportunity to

participate in alliance trade shows, working groups, PR and marketing opportunities and other related activities. Winners will be paired with mentors from the Z-Wave community in their related industry to provide technical and marketing and business development support.

Go here to learn more about Z-Wave Labs, apply for the competition and read frequently asked questions.

 

 

 

Allegion talks on recent acquisitions

 - 
Wednesday, May 13, 2015

I saw that Allegion had some interesting news, recently finalizing its acquisition of sliding- and folding-door company Brio, based in Syndey, Australia. I got the chance to hear a bit more about it from Franklin McClelland, Allegion’s VP of business development.

“Brio and Allegion have a strong relationship in New Zealand as well as in Australia, where [the companies] have worked on projects together,” McClelland told me in an email interview. “As we started having more strategic dialogues with Brio’s parent, we came to realize that Brio is very complementary to Allegion: They are involved in specifications for door hardware, and there are synergies in terms of channel.”

Brio’s current GM will still manage the company in its Australia location, McClelland said. “We are working with a great management team [at Allegion], who will continue to grow Brio while creating a complementary platform for the other Allegion lines.”

Brio has an office in Rochester, New York, and has a “growing US presence,” according to McClelland.

Terms of the finalized deal, announced May 4, were not released.

Allegion’s announced the finalized acquisition of Zero International, a little over a month before, on April 1. Zero is a New York based provider of commercial door and window products.

“The Zero International acquisition allowed Allegion to expand its presence in the door and hardware accessories market, and there are synergies in terms of specification and channel,” McClelland said. “The new Zero suite of products gives Allegion an increased emphasis on green building applications that support heating and cooling efficiency, as well as delivering the sound dampening and fire and smoke sealing solutions that commercial customers are seeking.”

“Zero, [like Brio], has a global footprint we can leverage and strengthen for our customers,” McClelland noted.

Figures of the Zero acquisition were also not released.

Thoughts on a potential ASG-Protection 1 merger

 - 
Wednesday, May 13, 2015

YARMOUTH, Maine—How about the news this week of a purchase of and merger of ASG and Protection 1?

I'm eager to see how this all shakes out. Taking a look at the potential 50.4x RMR mulitiple if the purchase price is $2 billion, Imperial Capital's Jeff Kessler repeated his oft-emphasized mantra that the multiple of RMR is not the be-all end-all of deal valuations. You need to look at EBITDA and Steady State Cash Flow, neither of which publicly available for these companies right now.

It's a hefty multiple though, something that Protection 1's Tim Whall has seen before, notably when HSM was sold to Stanley in 2007 for 60x Remember that? Whall ushered in the era where every alarm company owner and his brother thought they'd get 60x.

Kessler did take a gander at the per-subscriber numbers for the potential ASG/Protection 1 deal, and said that at $2 billion, the value-per-subscriber for these two companies would be $1,164. That is not a high number and it is lower that the current value of ADT subscribers and Ascent (Monitronics) subscribers, he said. BUT, then again, the mix of subscribers is not comparable, he added. For example, Protection 1 has residential, multi-family, wholesale customers—from cable companies and other entities—as well as national and large commercial accounts. ASG has a mix of resi, small commercial, large commercial and government. So, the "per subscriber" metric could also be thrown off by one of the specific groups of subscribers.

Kessler noted that the Protection 1 has "not been growing that fast" and said that cash generated has gone into it national accounts and small business divisions. He called the technology investments the company has made in this area "exceptional" and complimented its residential platform as well which uses "Alarm.com and internally generated software." He is a big fan of Protection 1's Don Young who he called a "tech guru in this industry."

Every time I speak to ASG, CFO Ralph Masino makes a point of talking about how most of the company's growth is organically generated. I have many examples, but here's a story from February 2014 where Joe Nuccio was talking about ASG's goal of reaching $10 million in RMR.

From that story:

Why is $10 million an important benchmark?
“It’s not the $10 million number that’s important, it’s [ASG’s] percent of growth year over year. [We’re able to continue to grow at that rate] even at our size,” Nuccio explained.
ASG likes to enter a new region every year. Those new regions generally start with an acquisition, but when ASG moves into that region it concentrates on internal growth, he said.
“We grow at 12 to 14 percent a year because we continue to develop our internal growth engine,” Nuccio said.
He pointed out that 76 percent of the $900,000 of RMR that ASG added in 2013 was generated by organic sales.
 

What will happen to the management teams of the two companies should Apollo's deal come to fruition? Protection 1 is clearly the larger of the two companies, but both companies have strong and highly regarded management teams. Maybe some of them want out ... for a little while anyway? We'll see. Kessler surmised that "Apollo would line them up and see who does the best job."

Mission 500 breaks record at ISC West; seeks aid for young Nepal victims

 - 
Wednesday, May 6, 2015

MIAMI—Mission 500, the non-profit initiative focusing on the security industry and dedicated to serving the needs of children and communities in crisis, broke its record and raised more than $120,000 at ISC West this year through its sixth annual Security 5K/2K Run/Walk and other events.

Meanwhile, the group is seeking new donations to help children displaced as a result of the devastating April 25 earthquake in Nepal. Go here for information. So far, with help from the security industry, it has raised $7,578 for the children of Nepal, well on its way to its goal of $10,000.  

At ISC West 2015, volunteer participation and fundraising efforts for Mission 500 “were stronger than ever,” George Fletcher, Mission 500 executive director, said in a prepared statement. “We are truly grateful to each and every corporate and individual sponsor that continues to help Mission 500 provide food, supplies, clothing, medical attention and education to children here in the U.S. and around the globe.”

Proceeds from ISC West events will support U.S. children through the Rebuilding Hope at Home program, which helps provide academic scholarships, school supplies and essential items like clothing, personal hygiene supplies and building materials, as well as disaster response and training for community organizations to empower young people. A portion of the proceeds will also support children in Tanzania and India by providing access to clean water, food, education and health care, Mission 500 said.

More than 30 5K/2K participants in April became members of the 500 Club, which recognizes volunteers who raise $500 or more for Mission 500.

Pelco was the lead team in fundraising, donating a total of $10,420 in individual and company-matched donations, Mission 500 reported. Max Burgess of BCD Video was the top individual fundraiser with $1,780, followed by Heather Miller with $1,725 to be matched by her employer, Anixter. Jesse Foglio, Mary Jensby, Stephanie Mayes and Ronnie Pennington each donated more than $1,000, according to the statement.

In addition, HID Global sponsored its second school-kit build at ISC West and put together $10,000 worth of school supplies for children in a Title One School in the Las Vegas Area, Rex Bell Elementary School. Meanwhile, Altronix and ISC West organizers Reed Exhibitions made a joint $10,000 contribution to Mission 500’s #ShowOrange campaign, which benefits children in poverty in the United States. 

PSA-TEC: Integrators on how to adapt and thrive

 - 
Wednesday, May 6, 2015

WESTMINSTER, Colo.—The subtitle for this year’s “State of the Integrator” panel discussion at PSA-TEC was “Adapt or Die.”

Despite the foreboding subtitle, the panelists' outlook was decidedly optimistic ... for some integrators anyway.

Panelists agreed that independent integrators who do not embrace changing technology and update to service-centric business models will not survive, but Jorge Lozano, president of systems integration firm Condortech, pointed out why independent integrators are ideally suited to adapt and thrive.

“We’re nimble … and this is the time for nimble companies,” he said. If you look at government regulations, the threat of cyberhacks and new technology as opportunities, Lozano said, “the horizon looks good.”

The panel discussion was moderated by Bill Bozeman, PSA Security CEO, and included Lozano, Brent Franklin, president of Unlimited Technology, Ron Oetjen, SVP of Securadyne, and Christine Lanning, president of IST. It took place May 5 here, where PSA-TEC is ongoing this week. The event is attended by independent integrators of all sizes, and includes more than 100 classes and panel discussions.

Other speakers agreed with Lozano. Ron Oetjen said Securadyne’s growth strategy involved acquisitions, organic growth and this year the company has invested in a consulting division. However, the company’s growth strategy is not etched in stone: “Leadership is willing to talk about it [the best ways to grow and overcome obstacles] and re-write the book if we need to," Oetjen said.

Christine Lanning said it’s important to realize that top company executives “don’t know it all.” Lanning uses “the collective knowledge base” of information she gathers from a number of sources such as PSA Security, ASIS as well as from groups outside the security industry. She also seeks mentors “who I want to mimic or emulate … that has been extremely helpful to us.”

Bozeman asked the panelists which vertical markets the companies work in and which are the most profitable.  

Subject matter experts are important said Brent Franklin, especially when you’re working in regulated industries. Unlimited Technology “takes a team approach in attacking new business opportunities,” sending out staff members who best understand the particular vertical. Those staff members need to know more than the applicable regulations, he said. “They need to understand who [the customers] are, how the business works, what the challenges are.”

Oetjen said Securadyne “encourages sales teams to become experts in one of the six vertical markets we’ve identified.” In terms of profit margins, Oetjen said the “data center market is the strongest margin-wise” and they have to follow a number of regulations. “Number two is easily power and utility companies. Number three is the oil and gas guys … but that market is the most volatile,” he said. “Everything is tied to the gas price,” he said.

IST works in a lot of verticals including local, county and state government; DOD work; and, top commercial companies in Hawaii.

As a small company, IST relies heavily on manufacturers for required training and certifications, she said. The company has also started to do “lunch-and-learns and user-group meetings [for customers and potential customers]…. where we bring the technology to them.” This gives IST an opportunity to talk to end users and the end users in turn “get invested in the technology and nine times out of ten, they stick with you,” she said.

The most profitable vertical for IST tends to be the large commercial businesses IST works with because they tend to chose an integrator based on expertise rather than price.

Lozano said Condortech’s is really only in one major vertical, government, but that also involves hospitals, education and border security.

Bozeman asked Franklin and Oetjen to talk about the key to delivering novel and unique technology?

Franklin said his team is constantly scouting technology, but it’s important to stay connected to the customer so you “realize what the next steps are with that customer.” Also, “getting the manufacturer involved with the customer is not a bad thing,” he said.

Confronting novel technology is something to think about Oetjen said. “What are we going to do when there’s only one smart camera out there [instead of many]? When one smart camera replaces fire systems because the camera [can detect fire]?” In order to get a customer to “rely on you to deliver a novel solution and trust you to deploy and execute the solution, [the relationship] starts way back … you educate and consult with the customer over time,” he said.

“You prove your thought-leadership,” Oetjen said. “You need to talk to and educate your customer at the same time, not just send invoices and ask, ‘What other camera or door can I do?’”

What about developing a culture of innovation in a company? How should systems integrators go about doing that?

A culture of innovation starts with company leadership, Lanning said.  “Are you showing passion, curiosity, adaptability?”  It’s important to “evaluate yourself and how you come across to your employees.”

Lanning said IST has an all-company meeting every Monday and every third Monday they do a team building or other educational exercise. She also send weekly emails focused on innovation and inspiration to all employees.

Lozano concurred with Lanning saying that we’re on the cusp of a new industrial revolution. Company leaders need to be doers. “Leadership is an action, not a position,” he said.

UL talks about cybersecurity in UL827

 - 
Wednesday, May 6, 2015

When I asked UL’s engineering manager, Steve Schmit, how the ISC West show was going, he said he spent a fair bit of the show discussing the recent updates to UL827, now including requirements for cybersecurity.

“Now with [cybersecurity] in the standard, we’re going to have conversations about [central station’s] network security, how they keep their customers safe,” Schmit told Security Systems News. Cybersecurity is something previous standards hadn’t formally  required, he said.

These cybersecurity measures include firewalls, intrusion detection systems, “risk assessment, developing a mitigation plan, to deal with those risks, and putting that all into practical application,” Schmit said.

UL spent five years developing the latest standard, released in October, Schmit said. It currently has a future effective date of late 2016.

Cybersecurity is a topic that is coming up more in the physical security industry. SSN readers earlier this year pointed toward this trend. CSAA’s annual meeting will even start with a keynote on the subject

Is now the time cybersecurity will start concerning central stations? Has it always been a priority?

I’ve heard from some in the industry that this could really impact monitoring centers looking to get—or—keep UL certification. If you have any insight or opinion on the changes, reach out to me and let me know. My direct line is 207-846-0600 ext. 254, email: sives@securitysystemsnews.com.

Smartvue gets $15m for IoTV play (Internet of Things Video)

 - 
Wednesday, April 29, 2015

NASHVILLE, Tenn.—Cloud video surveillance provider Smartvue announced this week that it secured $15 million in financing from Fortress Investment Group, a $67 billion firm.

I spoke to Martin Renkis, Smartvue founder and CEO, this morning and asked him what Fortress, which typically works with much larger companies, saw in Smartvue. Fortress likes Smartvue's vision of being "a major cloud platform in the video surveillance services business," Renkis said.

"[Fortress] saw what we saw, which is that [the Internet of Things] is going to be gigantic and someone is going to be the leader driving video surveillance services using the cloud," he said. Renkis and others believe that many of the "things" that will be connected to the Internet—cars and televisions for example—will have cameras or will "be video-enabled somehow."

Renkis describes Smartvue as a cloud surveillance and IoTV (Internet of Things Video) technology company, that will "develop the backbone for the storage, management, security and distribution of video for the Internet of Things."

Smartvue announced at ASIS 2014 that it is working with Western Digital, "which sells one million hard drives a day," to embed Smartvue software on their devices, so customers "who buy their NAS and want to save video to the cloud can do this with this software." Smartvue is also embedding its software on HikVision cameras, so no NVR is necessary.  

Of course, Smartvue has been in the cloud business since Renkis founded the company in 1998, "Since day 1, before it was called the cloud," he said. Fortress also likes the fact that Smartvue has "27 patents filed over the past 10 years to cover the technology we develop," he said.

Smartvue provides its platform "to telcos, cable companies, security companies [commercial and residential] ... to help them generate recurring revenue."

The new funds will help support Smartvue's current work with Internet Service Providers, cable companies, telecoms, IoT device companies and cloud storage providers. Renkis said Smartvue has had notable success selling platforms to telecoms which they sell under their own names. He declined to name the telecoms Smartvue is working with. The funding will also be used for engineering staff with the goal of creating more intellectual property, Renkis said.

Smartvue is privately held, based here, and has just under 100 employees. It has three main pieces of software: VMS software that it builds into NVRs and sells; Low-level firmware (or a lean VMS) that it embeds in cameras, gaming consoles and other devices; and, centralized global video platforms.

 

Vivint alerts homeowners about scam artists

 - 
Wednesday, April 29, 2015

Say your residential security company has made a huge dent in a particular neighborhood. You’ve got the area covered and all is good, for you and for homeowners.

Then some shifty guy comes around that neighborhood, knocks on your customers’ doors and professes to offer a better deal for their homes’ security than you can provide.

The guy is likely part of a door-to-door scam, and it’s also likely more guys like him will be showing up over the summer months, according to the Better Business Bureau. I read about a spate of this going on recently in Corpus Christie, Texas, but that's not to say Corpus Christie is a unique target of such ploys.

Vivint has a way of letting its customers know to be on the lookout for such scams. It encourages aware customers to contact the company about suspected scams or deceptive sales practices in their neighborhoods. Upon that notification, Vivint will send out an alert to alarm panels owned by customers in the impacted area. The message says that security scams have been reported nearby, and also gives a 24/7 phone number to call to verify a Vivint rep who might legitimately show up at the door.

“At Vivint, we take all possible measures to keep our customers protected. This includes keeping them apprised of what’s going on in and around their homes in real time,” Steve Dixon, VP of customer experience and operations, told me via email.

"The security alert is one of the things Vivint uses, in addition to customer emails and calls, to advise Vivint customers about questionable or deceptive sales practices used by competitor sales representatives in the area," Dixon said.

Good for Vivint, I say, and to all the other resi providers who provide such a service.

Scam artists, beware!

Bold surpasses recent target for new hires

 - 
Wednesday, April 29, 2015

Bold Technologies, a central station software provider based here, has hired 14 people in the last eight months, company president Chuck Speck told me, more than doubling its standard rate of five or six new employees per year.

“Most of [the employee growth] is spurred by bringing new customers on,” Speck said. Bold added staff to its new fulfillment department, which works on implementation with new customers, he said.

The fulfillment department was started out of continual customer growth, Speck said. “We’ve put on about 60 new central stations a year … [for] around 8 years. You have to grow your infrastructure to support that kind of growth.”

Bold will soon reach a total of 61 employees, Speck said, already surpassing the company’s one-year goal of 60, set in January. Seven of these employees were added in the last five weeks, and only two of the newest 14 hires were replacements, Speck said.

“The industry is changing enough that there are new needs in the industry,” Speck said. He cited cybersecurity and home automation as examples.

“Cybersecurity is now one of our newest forays,” Speck said, mentioning Manitou’s integration with WebProtectMe, announced at ISC West 2015. It allows central stations to monitor Internet activity for residential customers, alerting them if users such as children access unauthorized sites or chat rooms with known predators.

The WebProtectMe integration has been submitted for an ESX Innovation Award, Speck said.

Bold addresses home automation through partnering with White Rabbit Electronics, a home automation company founded by Speck and Rod Coles, Bold’s CEO. Through integrating Manitou with White Rabbit’s Smart Hub, linking the platform with the company’s entire line of products. “Bold’s integration with White Rabbit is one that we’re very excited about,” Speck said.

Pages