Three years ago, FLIR Systems acquired Lorex, a Canada-based maker of surveillance cameras geared primarily towards the small business and consumer markets under the Lorex and Digimerge brands. The move was part of a larger effort by the company to expand their footprint into the visible imaging space. Since the Lorex acquisition, FLIR has worked to further refine its visible imaging product portfolio to broaden its customer base in the market. Now, the company is looking to join the ranks of other end-to-end video solution providers as it recently announced the purchase of rival DVTEL for $92 million in cash.
According to John Distelzwieg, vice president and general manager of FLIR’s security segment, the company’s business strategy has been to "control the corners," meaning they have placed a great deal of emphasis on serving customers at both the very high-end and very low-end of the market. Following the consolidation of Lorex into the company, Distelzwieg said the next logical step was to focus on the mid-market with enterprise-class solutions and DVTEL offered exactly what they were looking for in an acquisition target.
“DVTEL looked to be a really strong combination of technology and engineering force, as well as product,” he said. “Our goal is really to provide end-to-end solutions at all levels. We have a PSIM product, for example, that services borders, ports and very high-end critical infrastructure applications, but it really didn’t have the capabilities you would need to serve enterprise-type security environments. The DVTEL acquisition shores that up and really completes our camera offering as well by bridging the gap between our high-end thermal video analytic-type cameras and the SMB cameras we had from the Digimerge lineup.”
From a perimeter security perspective, Distelzwieg believes the combination of DVTEL’s ioimage analytics and VMS offering with FLIR’s thermal cameras will almost immediately enhance the value the company can provide to its traditional customers in the critical infrastructure sector. Distelzwieg said the company plans to keep DVTEL’s offices, personnel and executive team in place. The DVTEL brand will be merged into FLIR, according to Distelzwieg.
“One we made the decision a few years ago to look beyond just thermal cameras in the video security market, it was always inevitable that we would look to offer the full spectrum of products and services,” said Distelzwieg.
John Mack, executive vice president, co-head of investment banking and head of mergers & acquisitions at Imperial Capital, which served as an advisor to DVTEL on the deal, said that the acquisition is obviously indicative of FLIR’s intentions to make a greater commitment to the commercial security segment of the market.
“This is a fairly substantial statement and… they now serve the full spectrum of the market from SMB all the way up to enterprises with the offerings they have from DVTEL both on the hardware and software side,” said Mack.
Mack believes FLIR’s entry into the video management software space is significant as it signals their intentions to compete with the likes of Avigilon and now Canon with its acquisitions of Axis and Milestone in being able to provide a full video solution.
“FLIR has some fairly big sales channels around the world so there are some obvious synergies for companies the size of DVTEL that, while they have a decent sized presence for a company their size, they have nothing like the sales channels that FLIR does so there is a big opportunity to get synergies out of the deal,” added Mack.
Another thing that could bode well for FLIR moving forward as a result of this deal, according to Mack, is that they are likely to become the largest of the end-to-end solution providers to be completely based in the U.S. “It will mean something in some segments of the market that this is the U.S.-based alternative that has a good relationship with the Fortune 1000 companies of the world,” he said.
Despite the increased footprint that the acquisition will give them, Jon Cropley, principal analyst for video surveillance equipment at IHS, said that FLIR will still have some work to do to gain a larger share of the overall video market.
“The acquisition of DVTel means that FLIR is expanding its presence in the professional market yet further, a market which IHS forecasts will be worth $15.7 billion in 2015,” said Cropley. “Despite a number of mergers and acquisitions in this market in recent years, the supply base remains fragmented. IHS estimates that the largest fifteen vendors accounted for just 52 percent of market revenues in 2014. Combined together, IHS estimates that FLIR/DVTel would have still been outside the largest fifteen.”
