Security surge in M&A: Tech adoption, recurring revenue models and consolidation push valuations to record highs

NEW YORK—For security companies looking to increase their value, investments in artificial intelligence (AI), the cloud and cybersecurity aren’t optional anymore - they’re the price of admission. That message was clear at the recent Raymond James Security Investor Conference. 

“If you’re not investing in AI, cloud, and cybersecurity, you’re not just behind - you’re irrelevant,” said Alper Cetingok, senior managing director at Raymond James. “It’s not a question of valuation; it’s a question of whether or not you’re even viable.” 

The conference, held Dec. 17-18 in New York City, brought together more than 70 companies and hundreds of investors, offering a clear view of where the industry is headed. 

Technology as a value driver 

Technology innovation dominated the conversation - and it’s driving a fundamental shift in how security businesses are valued. Companies leading with AI, cloud-based architectures, and cybersecurity are commanding premium valuations, often trading at multiples once reserved for pure tech firms – 10x, 15x, and even 20x annual recurring revenue. These models tend to be subscription-based, delivering high margins and predictable cash flows. 

“If it’s SaaS (Software as a Service), you’re looking at 80% to 90% gross margins,” Cetingok said. “Tech-enabled services businesses are in the 60% to 80% range.” 

Convergence and consolidation 

Two structural shifts are reshaping the industry: convergence and consolidation. Cyber and physical security are merging, while physical security modalities – video, access control, emergency communications – are increasingly integrated into unified architectures. 

“Motorola is a great example,” Cetingok said. “They’ve connected the dots across emergency communications, video, access control and visitor management.” 

Meanwhile, consolidation is accelerating across all 16 sub-sectors that Raymond James tracks, from guarding to systems integration. Private equity (PE)-backed firms are aggressively pursuing buy-and-build strategies, and strategic buyers are back in force. 

Investor hotspots 

Video surveillance, access control, systems integration, fire and life safety, public safety technology, and educational security are attracting the most attention from investors, according to Cetingok.   

Two recent year-end deals underscore this confidence: GI Partners’ acquisition of Netwatch and Allied Universal’s sale of a controlling stake in AMAG Technology to Shore Rock Partners signal both new entrants and established players doubling down on security. 

“You’re seeing a broad base of investors coming into the market,” Cetingok said. “It’s not the same repeat guys – it’s new investors making bigger bets.” 

Impact on integrators 

The M&A wave is reshaping competitive positioning for integrators. Consolidation is creating larger players with the scale to serve national accounts more effectively, while technology convergence is simplifying deployments. 

Integrators that embrace scale and advanced technologies will be well-positioned for growth in a market that increasingly values speed, efficiency, and comprehensive service delivery. 

“As technology enhancements occur, integrators can deploy more quickly and move on to the next job,” Cetingok said. “They spend less time configuring and maintaining systems, which improves profitability and customer satisfaction.” 

Looking ahead  

Cetingok expects 2026 to bring a meaningful uptick in strategic activity, alongside robust PE investment. While PE will likely remain dominant by volume, strategic buyers are poised for a comeback – especially those seeking to expand capabilities through acquisition. 

As business models shift toward managed services and SaaS, Cetingok stressed sellers must present clear data on retention, attrition, payback periods and return on investment (ROI). These metrics require consistent tracking and disciplined operations. 

“It’s going to be a crowded market,” he cautioned. “Companies preparing for a sale or capital raise need to get ready early - track unit economics rigorously and stand out.”