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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 " 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:

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.

Goings-on at Guardian

Wednesday, April 22, 2015

Guardian Protection Services has been busy lately, rolling out a new funding process for dealers and a new mobile app for customers along with a rebranding initiative during its 65th year.

A meeting with Guardian at ISC West last week didn’t come off as planned, so this week I caught up by phone with Joseph Lininger, VP of marketing, to talk about recent activity at the super-regional.

Guardian will now pay authorized dealers on a daily basis as opposed to a weekly basis for the accounts it purchases. “If the account is approved on Monday, the dealer gets paid on Tuesday,” Lininger said.

The change in payment processing was made to boost dealers’ cash flow to help optimize their operations. Guardian invested in proprietary software to accommodate the change.

Guardian also has released a mobile app for its customers who use the platform to control their homes. Developed for both iOs and Android, the app provides remote access to home security and automation systems through an Internet connection. Future upgrades will include more functions, added Guardian services and special messages.

The new dealer program and the app come on the heels of Guardian’s recent rebranding. A new logo and tag line—“At the Heart of Your Connected Home”—for resi and builder business divisions are in place to give customers “the correct perception of Guardian as a customer-centric technology firm specializing in security and automation while providing the most reliable, technologically advanced services to homes and businesses,” the company said in its announcement.

The rebranding project, which took a year to complete, was initiated to reflect the company’s evolution and position it for the future, Lininger said.

“We always keep our brand awareness at the top of our mind, Lininger said.

COPS' David Smith talks about 'redundant staffing'

Wednesday, April 22, 2015

Since I came into the industry, I have heard a lot about redundancy; making sure that everything runs smoothly, service is consistent, nothing is down for long. At the center of these discussions has always been the latest technology that adds new levels to that redundancy. On the show floor at ISC West, I heard David Smith, director of marketing and communication for COPS Monitoring, talk about an entirely different kind—redundancy of people. This is the task of trying to find the same types of operators that mesh well with the company’s goals and requirements to ensure that service at one location doesn’t differ from that of another.

"Redundancy from a technological standpoint is much more straightforward than redundant staffing. Successfully replicating a training program and maintaining consistent performance levels across multiple sites is much more difficult to master,” he said.

This is an important consideration for a wide-spread company like COPS, Smith said, but having multiple locations helps. COPS has 350 dispatchers, and adding more. It would be difficult to find that many people who fit COPS’ bill in the same place. “We have a very strong company culture that permeates the entire organization.”

“Creating a unique, desirable workplace is part of the culture at COPS, and has proven to be of high value to our employees,” Smith said.

It's a little easier to find the best candidates when looking for operators in the surrounding areas of six different locations, he said.

“Qualifying someone as the ‘right person’ to be a successful dispatcher is determined by more than education, experience, and attitude: we believe that COPS dispatchers must also have the proper blend of professionalism, personality attributes, ability, and sense of duty,” he said.

In addition, the company is increasing dispatcher positions at its locations—30 positions in its Florida facility, with similar possible expansions at the Tennessee and Arizona centers as well.

AMAG to sell Salient video products under Symmetry name

Wednesday, April 22, 2015

AMAG's big announcement at ISC West was about selling Salient's video products under AMAG's Symmetry name. In an email interview, Matt Barnette characterized the deal as different from its partnerships with other manufacturers. Known for its Symmetry line, AMAG Technoloigies is a provider of access control and integrated security management systems for government and commercial customers.

"Traditionally, we do not resell another technology partner’s products under the Symmetry brand, but this partnership will lead us to faster and greater innovation," Barnette said. 

"We are offering Symmetry CompleteView VMS, Symmetry PowerProtect NVR platform, Symmetry TouchView Mobile Apps and the Symmetry Dual and Quad monitor Guardstation client workstations. These products augment our current Symmetry VMS, Encoders and HD camera lines," he added.
Asked what drove this partnership, Barnette said that AMAG has worked closely with Salient Systems through its Symmetry Extended Business Solutions Program. "They have been a proactive partner, and were always quick to update the integration with our Symmetry product whenever new features were available. Salient valued the technology integration between our two companies and made upgrading the integration a priority. We recognized what a great partner they are, and so did our customers, so it made sense to enhance the partnership."

Barnette said that AMAG and Salient's product management and engineering groups will jointly develop "a unique set of features and future products that will only be available through the AMAG channel."

"Salient offers a VMS and NVR platform, along with a robust mobile app. Many of our customers were looking for the features in the Salient platform and chose to either integrate their Symmetry system with Salient or use it as a stand-alone product," Barnette explained.

The tighter integration will make the system easier to use and may open up "opportunities now for future customers looking for a robust and more standardized access control and video management solution."

AMAG will continue to support its existing Symmetry VMS, encoders and HD cameras, along with its other video management and camera partners. "Our own video product line and existing relationships with video partners are very important to AMAG. Ultimately, what we are accomplishing with this partnership is the creation of products with new unique value and to give our customers more choices," he said.

AMAG Technology is based in Torrance, Calif., and has offices throughout the U.S.