Canada-based surveillance solutions manufacturer Avigilon announced Thursday that it is moving beyond the production of video products and into the realm of access control by acquiring RedCloud Security.
Avigilon purchased RedCloud, which provides web-based, as well as physical access control systems for $17 million in cash. The company said it expects the acquisition to be neutral to 2013 earnings and accretive to 2014 earnings.
Avigilon, which achieved record growth in 2012 by earning more than $100 million in revenues, said that the acquisition will add a "complementary product line" to its portfolio of high-definition surveillance products and would also enable them to tap into the fast growing market for electronic access control systems.
According to Avigilon President and CEO Alexander Fernandes, one of their primary reasons for making the acquisition and entering the access control market was the synergies that existed between the two companies and how it could further the company’s goal of being a “one-stop shop” for security. "The end user base, for the most part, is the same, meaning that most users of video surveillance also use access control as part of their security program," he explained. "We already have a global sales channel of integrators and resellers that also, for the majority, sell access control in addition to video as part of their business. So, it seemed like adding access control was a natural fit."
Fernandes said another factor that the company weighed in making the acquisition is the continued convergence of IP-based security devices onto the corporate network. "There is the possibility now to tie in the access control and video to control it through one interface," he said. "So, instead of having disparate components that don’t talk to each other, we can have one command and control interface that the operators can access and then you can add value by linking the database of video with the access control database."
What made RedCloud attractive from an acquisition standpoint, according to Fernandes, was the company’s technology and its potential to grow in the marketplace.
"(RedCloud’s technology) is designed on the most modern IP platform. It’s sort of platform agnostic, you can run it on Windows and Linux and other things, so it fits very well in the way we’ve designed our current product," he said. "The other thing is that while they were an ideal candidate because they had a solid product platform, at the same time they had minimal sales channels and brand investment. There are many other access control companies, but a lot of them are established to the point where they have their own sales channel, which in many cases may not be compatible with our sales channel so it would create conflict in order to integrate the businesses. Some of them have invested lots of money in their own brand development and marketing and we don’t really need to have another brand as part of our business. It allowed us to get what we wanted which was the product without having to buy or pay for a lot of other stuff that in the end is maybe redundant."
According to Fernandes, RedCloud will be integrated into Avigilon over the next six to eight months. "By the end of this year, we would like it to be mostly integrated with our operations and, in the short term, we envision just continuing with the RedCloud brand as it is as a standalone business unit,” Fernandes explained. "Over time it remains to be seen. We may retain RedCloud as a sub-brand as a part of the product brand. For example, it could be 'RedCloud by Avigilon,' 'RedCloud Access Control by Avigilon' or something along those lines, but generally speaking, we’re looking at fusing the companies together and mainly leveraging the Avigilon brand and the Avigilon sales channel. At some point, the website and the marketing materials and the product would become more assimilated under the Avigilon brand."
Fernandes said that Avigilon will be retaining the majority of RedCloud’s staff with the exception of the company’s CEO and board of directors who have tendered their resignations. RedCloud’s founder Terry Neely, who also serves as the company’s president and chief technology officer, will continue to lead the access control development team.
Fernandes characterized this as an "opportunistic/strategic" acquisition for Avigilon and indicated that the company remains primarily focused on organic growth.
"In the short term, we don’t have any acquisition targets on our radar screen right now. Our core business is HD video surveillance and we remain focused on our core business," Fernandes said. "We felt that access control would be complementary to what we do. As a public company, we get a great deal of people coming to us unsolicited offering their businesses for sale. For any number of reasons, a lot of them don’t make sense, but every once in a while I would supposed that it is quite likely that there are other businesses along the lines of access control, analytics, intrusion detection, PSIM companies or things of that nature that are complementary to what we do and may very well make sense for us in the future, but that is not our primary objective."
