Nortek to buy 2GIG for $135m

Deal includes five-year supply agreement with Vivint
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Thursday, February 14, 2013

PROVIDENCE, R.I.—Nortek, parent company of Linear, announced this morning that it will acquire 2GIG Technologies for $135 million.

2GIG, known for its Go!Control system, is a manufacturer of security and home automation equipment. The company was launched in 2009 by two former Honeywell employees.

Nortek’s Linear business helped develop the 2GIG Go!Control product. Linear was in the news a couple of weeks ago when it purchased a line of Z-Wave-enabled products.

“Our partnership with 2GIG goes back about five years. We worked with 2GIG on developing the original panel as well as the systems that have evolved around that panel,” Mike O’Neal, president of Linear, told Security Systems News. “We have a very tight working relationship.”

O’Neal is excited about now being able to bring 2GIG products “to a whole range of new dealers and distributors.”

Vivint was 2GIG’s largest customer and will now become Linear’s largest customer, and Linear is looking forward to “continuing to work with [Vivint] as they move through and innovate around the security industry moving forward,” O’Neal said. The deal includes a five-year supply agreement with Vivint.

He said Linear’s purchase of a Z-Wave line is indicative of how it is looking at “other possibilities and finding products that complement what we view as the future of the security industry.”

Will that mean more acquisitions? Perhaps. “We may buy, license, build or develop [new offerings], but you’ll see a lot coming from us in the next 18 to 24 months,” he said.

“This is an absolute perfect fit for 2GIG,” Lance Dean, 2GIG co-founder told SSN in an email interview. “We’ve known Nortek/Linear from the very beginning. They’ve been an instrumental part of our success.”

“This will allow us to become a major player in the space for years to come. Nortek/Linear brings tremendous resources and capabilities … they’re a manufacturing organization and they have a tremendous suite of products. There are so many synergies between the two groups,” Dean said.

2GIG is currently owned by Blackstone. Blackstone acquired 2GIG in December, the same time it acquired Vivint.

While 2GIG was never owned by Vivint, the two companies have had a long association. They shared some of the same investors before the Blackstone acquisition: Goldman Sachs, Jupiter Partners, Peterson Partners and Vivint CEO Todd Pedersen.

Vivint is also the largest single customer for 2GIG’s products, although in 2012, 2GIG derived more revenue from its 2,000 other dealers than from Vivint. The company sold more than 300,000 systems, with about 160,000 to customers other than Vivint, according to Todd Santiago, president of 2GIG.

Duane Paulson, Linear SVP, product and market development, said Linear’s philosophy is to “connect and be in control” of the three product pillars: security, access control and integrated systems, and health and wellness. Linear is a major provider of PERS products.

“All of the products [now and in the future] will link into the residential security control system, the commercial access control system or what evolves out of our PERS business,” Paulson said.    

The entire 2GIG team, including Lance Dean, will join Linear. The exception is Santiago who will join Vivint in the newly created position of chief sales officer. He will begin transitioning to Vivint during the next few weeks.

“I’ll assume responsibility for existing and future sales verticals at Vivint,” Santiago said. “We have our sights set on additional sales verticals, including commercial and international expansion.”

Lance Dean said: "Todd has been a huge part of why 2GIG has been so successful ... It has been great having him as my partner these past four years. He has a great opportunity and I know he'll do a great job in his next role and we will miss him."

The Nortek acquisition of 2GIG will be financed with a combination of cash on hand and Nortek’s credit facility. It is subject to regulatory approval. Executives expect the deal to close in the next 30 days.