Get it in writing
In reflecting on this past year’s deal activity, it occurs to me that my deals have been held up mostly by two mundane details: a lack of signed monitoring contracts and an inability on the part of the seller to easily fill in what I call the acquisition spreadsheet on their account base.
August 16, 2016 By Victor Harding
Regarding alarm monitoring contracts, here is what is important today if you are thinking of selling your accounts.
Increasingly, buyers in Canada are look for monitoring contracts signed by the customer with at least the all-important waiver of liability, assignability and auto-renewal clauses on the back of the contract. For U.S. buyers, these clauses are almost mandatory whether they are buying Canadian or U.S. alarm accounts.
With ADT Canada taking over both VOXCOM and Protectron buying activity in the Canadian market, signed monitoring contracts with these three clauses are now also almost mandatory. Some deals can be done where a small portion (10 per cent) of a seller’s accounts are contracted either by the seller or buyer after the deal is closed.
Getting contracts signed by customers is not that difficult. It is clerically demanding for the seller but not a stretch for the customer. Most buyers will make do with a signed one year contract with the appropriate clauses.
Most customers in this day of cellular and other service contracts understand having to sign a one-year contract. The process of getting contracts signed can be done by the seller all at once or as the accounts comes up for billing.
The process requires clerical time both in filling out the contract details to be sent out and the follow up but from what I hear, most dealers get a good response rate. Quite frankly, when you think of the risk of dealing with all those customers without a waiver of liability signed, I would not want to face the prospect of not having signed contracts on all of my accounts.
The real surprise to me in doing deals recently is how many sellers I have encountered who have had trouble filling out what I call the “acquisition spreadsheet” on the accounts they are selling.
Every seller of alarm accounts has to list out the key details on the accounts they are selling. As an aside, an abbreviated version of this list is usually attached to the purchase and sale agreement and the fuller version is used by the buyer to set the monitored accounts up in their billing system.
The acquisition spreadsheet is usually an Excel spreadsheet listing out the key details on the account base:
• system number;
• account name;
• premise address;
• billing address;
• monthly monitoring rate;
• billing cycle;
• last and next billing date; and
• whether the account is billed using an invoice or using pre-authorized payment through a bank or credit card.
It sounds straight forward, but many sellers have accounting and billing software that does not make it easy to transcribe the data required above onto an Excel spreadsheet.
Believe it or not, the process can end up taking weeks if the seller has 1,000 accounts or more. I strongly recommend to anyone who is planning to sell their account base in the next year or so that they start asking questions now about how difficult it will be to get this information out of their systems. You may get a surprise.
In the process of doing the spreadsheet, sellers often find that they don’t have the number of monitored accounts they thought they had. If you want to get the format of what an acquisition spreadsheet looks like please contact me at email@example.com.
I recommend that you attend to these two important details if you are planning to sell in the near future.
Victor Harding is the principal of Harding Security Services (www.hardingsecurity.ca).
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