Earlier this week, Stanley Black & Decker announced that it has entered into an agreement to sell most of its security assets, including its Commercial Electronic and Healthcare business units, to Securitas for $3.2 billion in cash. The deal does not include Stanley Access Technologies, which manufacturers a variety of automatic sliding doors, revolving doors and automatic swing door operators.
The acquisition will mark a homecoming of sorts for Stanley Security, which actually began its life as the systems integration arm of Securitas before changing its name to Niscayah in 2008. The company was later sold to Stanley Convergent Security Solutions (Stanley CSS) in 2011 for $1.2 billion.
According to John Mack, Executive Vice President at Imperial Capital, the deal comes as little surprise to most industry observers, as Stanley has been rumored to be interested in divesting the company for the better part of two years. Additionally, Mack says that Securitas has had a of goal of reassembling the technology integration component of its business, which was jumpstarted by the purchase of Diebold in 2015.
In fact, the company has significantly expanded its footprint both in North America as well as globally via M&A in the years that have followed the Diebold purchase. Just last year, Securitas acquired the electronic security businesses of Stanley Security in five countries – Germany, Portugal, Switzerland, Singapore, and India.
Additional acquisitions made by the company over the last five years include:
- 2017 - Central de Alarmas Adler (Mexico)
- 2018 – Kratos Public Safety and Security (U.S.)
- 2019 – Allcooper Group (UK)
- 2020 – Techco Security (Spain)
- 2021 - Tepe Güvenlik A.S. (Turkey), Protection One (Germany) and Supreme Security Systems (U.S.)
Combining Tech and Guards
“It is pretty clear they were going to be a major player looking for assets like this,” Mack explains. “The thesis that you are going to integrate manned guarding with technology solutions in an effective hybrid solution is very logical and fits all kinds of other trends that are going on in the security industry right now. Securitas investing to be at the front of that trend – by buying more of the security technology integration side of the equation with the Stanley business to couple with their guard business – makes a lot of sense.”
Jim McHale, Managing Director of Stockholm-based market research firm Memoori, says a deal of this magnitude was necessary for Securitas to be able to achieve its goals in the market and provides them with the capabilities to provide the services and ROI that end users are looking for in the industry today.
“From the Securitas perspective, the acquisition of Stanley Security is a step away from low-margin guarding services and towards being a ‘leading intelligent security solutions partner.’ At a multiple of 13-times 2021 adjusted EBITDA, they paid a premium,” he says. “This aim of being ‘a leader in intelligent services’ won't be possible without the electronic security technology on top of which they can deliver security solutions and data-driven SaaS – services with much more attractive growth and profitability.”
In some ways, Securitas is following the template created by Allied Universal, which has sought to bolster its technology integration capabilities in tandem with the growth of their guard services business; however, Mack says Securitas was already much more advanced in this regard.
“If there are logical ways to use technology in lieu of guard services or to integrate the guard with technology to create a better solution, then I think that is clearly where market is today,” Mack adds.
Industry Still Highly Fragmented
Despite the numerous acquisitions made by the likes of Securitas, Convergint, ADT Commercial, and a host of other conglomerates in recent years, Mack says there is still significant business to be had by smaller, local and regional integration firms.
“I would characterize the market as having three tiers broadly: first, there are very local, small players that are typically serving one or two markets, then you have super regionals that are servicing a part of the country – northeast, southeast, etc. – and finally you have the national players,” Mack explains. “It is pretty clear that for a nationally-oriented business with locations across the country, there is much higher probability today that they are going to be served by one of these bigger companies that can bring the resources together to accomplish that; however, there is plenty of room in the market for very effective competition by super regionals and local players to serve the next tier down in the market. This is a huge part of the market, because there are far more businesses with smaller operations than there are large business campuses.”
McHale agrees, but says that large, global integrators are anticipating grabbing increased market share as security technology continues to advance.
“We are still a fair way from a handful of large integrators servicing the bulk of the market. The majority of the market is still made up of numerous national and local integrators, a fact Securitas acknowledged in its investor presentation,” McHale says. “Securitas is betting that global players can start to take more market share as security services become more complex and economies of scale come into play. This seems to be the general direction of travel although perhaps not as fast as these global players would want.”
Mack adds that local and regional integrators may even have an advantage over larger national and companies in certain circumstances.
“It has been a little harder for the larger national players to win some of that local, regional business because it may be that the local or regional business is more focused on super-attentive, high-quality, localized service with relationships – which is harder for a national player to bring to the table,” Mack says. “Whereas the local or regional guy may have a harder time winning the national business, the converse is certainly true as well.
Mack believes that current pace of M&A among integrators will continue as firms like Securitas continue to look to increase capabilities.
“Fundamentally you start with the fact there is strong demand for these services,” he says. “This is a generational transition of technology – people are moving to upgrading technology to digital technology, cloud-managed service offerings, and AI-based and software-based solutions to essentially manage systems. A lot of trends are providing an incentive for growth in the industry.
“As long as there is growth in a pretty large industry, clearly you are going to see a desire by players who want to compete in that sector to build value,” Mack adds.
Joel Griffin is the Editor of SecurityInfoWatch.com and a veteran security journalist. You can reach him at [email protected].
