Business & Marketing
The upside of acquisition
March 16, 2010 By Ivan Spector
But before that, let’s look a bit closer at the transaction itself.
The No. 1 ranked ADT is purchasing the No. 2 ranked Brinks, according to the 2009 SDM 100 Report. ADT is arguably the most recognized Security Alarm company in North America. It operates four monitoring stations and has more than 5,000,000 clients. Brinks currently operates two stations, with more than 1,300,000 clients.
ADT (or Tyco) plans to capitalize on the great number of synergies to justify the deal and to accelerate their return on investment. That could mean they will close monitoring stations and reduce staff and overhead; close competing branches and release marginal performers. I find it interesting that Brinks has recently upgraded its monitoring station software and claims to have spent upwards of $50 million rebranding under Broadview Security.
The acquisition brings a lot to the table for ADT. Brinks has an extremely low rate of attrition; its equipment installation has been standardized from the beginning; it is very well run and has a very good management team. It is heavily concentrated in the residential marketplace, and ADT has picked up a dedicated dealer base. It has also eliminated a major competitor in the residential market.
Still, even with an acquisition of this size, many people estimate that ADT does not achieve a market penetration of more than 30 per cent. This indicates how fragmented the market is and underlines how service-oriented this industry continues to be.
And now for those who are truly excited about this: the companies that compete head-to-head with Brinks. A competitor has vanished from their ranks. There will likely be a sharp rise in the number of people looking for work. For the most part, they will be talented and well trained and will add professionalism where they end up.
That can only be good if you are looking for additional people in your company. The same can be said for the installers and service technicians who may now be looking for work in case their branches are eliminated.
But what this also says is that the industry is healthy. That so much money is being thrown around the security alarm business means that other well-financed players will take a long, hard look at our business model, and when that happens opportunities will suddenly open up. The RMR model we have is something that people in other industries would kill for.
So, as with everything, when change happens, you need to look at the up side. Embrace it and enjoy it.
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