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by: Martha Entwistle - Wednesday, September 2, 2015

Avigilon, a video surveillance and end-to-end security solution provider, today announced two resignations and a management reorganization.

Bryan Schmode has resigned from his role as COO, and Collis Heath, SVP of Global Operations, has also left the company.

There have been a number of changes in Avigilon’s management ranks over the past few months. In August, Pedro Simoes, SVP of global sales, resigned and was replaced by James Hendershot. In May, Danny Cam, VP of Engineering left and was replaced by CTO and SVP Mahesh Saptharishi.

There have been several management changes in the past few years as well. The company announced today plans to streamline its senior management reporting structure “to increase operational efficiency.”

Avigilon's seven major departments—product development, sales, marketing, operations, finance, legal, and human resources—will now report directly to Alexander Fernandes, Avigilon's founder, president, CEO, and Chairman of the Board.

“This refreshed structure brings Mr. Fernandes closer to Avigilon's day-to-day operations while empowering department leaders with greater authority,” the company said in the announcement.

Avigilon has been one of the fastest growing security companies. Its stock, which trades on the Toronto Exchange, closed at $12.37 on Sept. 2. Its 52-week high is $25.62. Its low is $12.34.

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by: Martha Entwistle - Wednesday, August 26, 2015

Will UTC buy Nortek?

The Wall Street Journal, citing unnamed sources, says it's in talks to do so for around $1.2 billion. I talked to some folks in the past few days who say the purchase, which may not make sense on the surface may indeed make sense. Other financial reports, such as the Motley Fool, concur.

Nortek is the parent company of well known access control, security and automation brands Linear, 2GIG and Go!Control. Those brands fall under the Nortek Security and Control division. It's  a global diversified company with a current market cap of $1.3 billion and an enterprise value of $2.7 billion, and the bulk of Nortek’s business falls outside security, it also does HVAC, air management and AV.

Based in Hartford, Conn., United Technologies Corporation is a global $81 billion company that makes building systems and aerospace industry products. Its segments include:  Otis elevators; Pratt & Whitney;  UTC Aerospace Systems and UTC Climate, Controls & Security, which in addition to security does HVAC and refrigeration. UTC owns access control provider Lenel (as one person I spoke to called it--the darling of the UTC security portfolio) and intrusion and smart home provider Interlogix.

UTC bought GE Security in 2010. Here's a Q&A we did at the time.  Two years later, UTC sold its fire and security integration business (Red Hawk) to a private equity group.

UTC recently sold its Sikorsky helicopter division for $9 billion, so they've got money to invest.

Neither Nortek nor UTC are commenting, but plenty of folks outside of the businesses are talking about it.

People I spoke to said that UTC went looking for Nortek—Nortek was not actively looking for a buyer. They don’t believe that it is the security part of the business that is necessarily driving the deal—but rather, the fact that Nortek’s lines of businesses line up with UTC’s Climate Controls and Security division, though there would definitely be some overlap with 2GIG and Interlogix.

As The Motley Fool explains it, what's driving the deal is that the numbers make sense.

From the report: “…Nortek could be a pretty nice bargain. Bought for today's $1.4 billion valuation, Nortek would cost UTC less than 0.6 times Nortek's annual sales. UTC stock, in contrast, costs more than twice as much, at 1.3 times sales.
Meanwhile, although it earns no net profits, Nortek does earn operating profits (i.e., it would have been profitable but for the cost of interest, taxes, and various one-time items). In fact, at its current operating profit margin, Nortek earned about $123 million in operating profit on its revenues last year. If, after buying Nortek, UTC is able to improve the latter's operations so as to extract something like the 16.5% margin that UTC's own Climate, Controls, and Security business achieves, then this would work out to $413 million in annual profits from UTC's new subsidiary -- $290 million better than Nortek made on its own.”

Will the deal happen? I have no idea. But I guess I need to be prepared for another ISC West booth visit where I have to learn, again, how the UTC security business has been realigned.

 

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by: Martha Entwistle - Wednesday, August 19, 2015

Systems integrator The Protection Bureau has opened a new branch office in Richmond, Va.

I talked to Matthew Ladd, CEO of The Protection Bureau, about the new office today. “We had an opportunity that came to us with people in Richmond who wanted to work for the Protection Bureau,” he said. The integrator has 152 clients in the area and has had “an ongoing service need in region,” he said.

“It was the perfect fit and opportunity. It made sense to open a branch office and we were able to do that with two technicians, a branch manager and a part-time office person,” Ladd said.

“It all came together in two weeks,” he said. The new staff members visited The Protection Bureau headquarters in Philadelphia last week and this week the office manager is in Richmond “teaching them about our systems and procedure so they can blend into The Protection Bureau way of doing business.

The Richmond office will service current and future Protection Bureau customers and Security-Net customers as well. The branch manager will handle sales initially, but Ladd plans to add more sales personnel. “We’ll look to expand and grow the office and make it another success for The Protection Bureau,” he said.

The Protection Bureau does about $15 million in sales annually and has 97 employees. In addition to its headquarters in Philly, it has a satellite office in Plainfield, N.J. That office has three technicians, but Ladd said it's not a branch office. “It’s a service point for our clients in North Jersey through New York and into New England.”

Ladd said that business in 2015 has been good and he’s hearing the same thing from other integrators. “The overall economy is getting stronger.”

by: Martha Entwistle - Wednesday, August 12, 2015

ESX will take place west of the Mississippi for the first time in its history next year when it moves to Ft. Worth, Texas.

The tradeshow organizers announced that the show will take place June 8-10, 2016. Organizers said Fort Worth was chosen because of ease of access from most cities, hotel selection, state-of-the-art convention center, and a "walkable and safe urban environment."

ESX will announce the schedule of events and the educational program in January.

 

 

by: Martha Entwistle - Wednesday, August 5, 2015

Alarm.com, the interactive services platform provider, made its first foray into the commercial market, with the purchase, earlier this year of Secure-i. Here's that story.

Its recent integration with Tyco Security Products marks another move for the interactive services platform provider into the small-to-medium commercial market.

Tyco is integrating its PowerSeries Neo platform with Alarm.com’s cloud-based services (interactive security, intelligent automation, video monitoring and energy management solutions). This, Tyco said, gives dealers the opportunity to offer small-to-medium commercial customers "simple and scalable" interactive services.

PowerSeries Neo "combines the flexibility of a modular, hardwired system with the simplicity of a wide range of compatible wireless devices," Tyco said. This platform uses PowerG wireless intrusion capabilities for a hybrid intrusion system. PowerSeries Neo features built-in Z-Wave capabilities through CDMA and HSPA (3G) communicators.

“We’re excited to bring the next generation of smart technology to the commercial space with the PowerSeries Neo powered by Alarm.com,” Dan Kerzner, chief product officer, Alarm.com, said in a prepared statement.

“We have seen smart home technology dramatically improve the safety and efficiency of homes and create more value for our dealer partners, and we believe there are significant opportunities in the commercial market to help business owners manage their locations, secure their properties and make them more efficient.”

Tim Myers, director of product management, Intrusion, Tyco Security Products said in a prepared statement that “The integration of PowerSeries Neo and Alarm.com uniquely anticipates the future needs of the connected environment, whether a residence or a multi-tenant commercial property, and provides infinite opportunities to maximize the system."

What do you know—We will be talking about this very development at Cloud+, SSN's new conference focused entirely on cloud-based technology. Here's a story about the conference and here's a link to the website.
 

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by: Martha Entwistle - Wednesday, July 29, 2015

Like others here at Security Systems News and across the industry, I was saddened to learn of Frank De Fina's death.

Over the past 10 years I got to know Frank and I admired him a lot. He was a great businessman who knew his technology and the security industry inside and out, but one of the reasons I liked talking to him is because he knew as much about music and art as he did about IP video.

And more than just talk about music, he was a musician. If you've been to PSA-TEC, you've probably enjoyed watching Frank play guitar at Bill Bozeman's annual PSA Jam. Here's a link to a 2010 performance.  And here is a photo of Frank playing at the House of Blues in Chicago at ASIS a couple of years ago.

Frank was a security veteran—he spent more than 30 years in security—but he was not one to pine for the good old days of the security industry.

He welcomed a challenge and he was forward-thinking.

Recognizing that the security industry is too gray, too male and too white, he worked to prepare the security industry for a financially healthy and vibrant future in many ways.

He was a mentor to many, he was active in security industry associations, and he was the driver behind a security college degree program at Mercer County Community College, which will launch in September.  De Fina worked with the Security Industry Association, Northland Control's Pierre Trapanese and System Sensor's Dave Lyons on the idea. The two-year program  will combine security-specific training, liberal arts and business classes and will lead to an associate's degree in applied sciences. 

As the industry “aggressively moves into IP, these new [degree-holding] professionals will be well equipped to fill upcoming positions,” De Fina told me in an interview. He was excited that the new degree program will expose young professionals to the security industry, an industry that most college students do not know about. Noting the "tremendous lack of diversity in the security industry," De Fina said one of the reason organizers chose Mercer County Community College for this program is because it “draws a higher-than-normal percentage of African Americans, Hispanics and women."

Frank did great things at Panasonic and Samsung and he was poised to do the same at Hikvision, but he leaves a legacy that goes way beyond impressive profits and sales goals achieved. As SIA CEO Don Erickson pointed out "he put forth ideas and proposals that would strengthen the industry rather than any one single company." 

And I think he had fun doing it. Frank De Fina was a multi-talented guy who was one of the most well-liked and respected people in our industry. He will be missed.

 

 

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by: Martha Entwistle - Wednesday, July 22, 2015

In the course of putting together the educational program for our new Cloud+ conference, I've been talking cloud almost every day and last week I met a new cloud provider called BluB0X.

The company is new, but the folks behind BluB0X have been doing cloud for a long time--the executives and some of the team are the people who founded TouchCom. Remember Touchcom? It was acquired by G4S in 2008. Here's a story about that deal.

I had a great conversation with BluB0X CEO Patrick Barry and COO Patrick de Cavaignac of BluB0X yesterday.

Barry told me the principals of BluB0X "took everything we learned in the 15 years building the previous [Touchcom] product and applied modern requirements and modern technology."  A significant difference is that Touchcom sold direct to end users whereas BluB0X is working with the channel. Another difference is that BluB0X focuses soley on security. "There is no facility management [component], BluB0X focuses on access control, alarm management, video, biometrics and visitor management," Barry said. 

De Cavaignac added that BluB0X also does elevator systems integrating into the destination control systems.

Barry said security has gone through three technology cycles--we're now now at the fourth technology cycle, he said

This fourth cycle, what BluB0X calls "Security 4.0," is the foundation of BluB0X's manufacturing philosophy. Barry said Security 4.0 comprises six technologies that are changing the security industry and which BluB0X is built around. They are: cloud/wireless; mobile devices; multi-factor biometrics; everything unified on a Mercury platform (the largest installed platform, Barry noted); open, standard, IP-based; and lots of analytics.

BluB0X is ramping up quickly, Barry said. It has several new customers. The company exhibited at ISC West and will be at ASIS in September. The company recently hired Siemens' veteran Perry Levine to do business development.

Want to demo the product? Barry said it's very easy to do. Because it's in the cloud, BluB0X provides a login and password "and they can use the demo site. ... They can try it before they buy it," Barry said.

It offers the standard cloud benefits of "one version, the current version that gets upgraded once a month, whereas the typical manufacturer upgrades once a year," Barry said.

Barry is also very excited about the product's ability to run on any mobile device. It's different, he said, because "it's readable whatever the dimension of the screen is ... you can run our software from a computer or when you're walking down the street with your smartphone." Many software programs work on mobile devices via apps, he said. That can be problematic because the interface looks different, there's a lot less power with the apps, and you have to keep updating the apps.

I will have more, later, in a story on BluB0X.

 

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by: Martha Entwistle - Wednesday, July 15, 2015

PHILADELPHIA—A news release came across my desk yesterday about Horsemen Partners, a new investment firm run by a couple guys who want to buy a security company as a platform for growth. Let’s just say I’ve seen this kind of news release before, but, this one caught my eye because of these guys’ background: They’re both business school grads and former Navy SEALs.

They’ve got backing to buy a security company, but my question was why security? Why do they want to get into this business?

I spoke to one of Horsemen Partners’ principals, Sam Alaimo. this morning. Alaimo said he and his partner, Mike Lahiff, could have invested in any number of industries, and they did take a close look at some health care-related businesses, but they settled on security for financial and personal reasons.

“We like the growth prospects, we like the [ongoing] evolution of the security industry and we like the people in the industry,” Aliamo told me.

Alaimo and Lahiff got to know security technology, specifically video monitoring and sensor technology, while serving as Navy SEALs in Afghanistan. Serving in a remote area, they saw the benefit of security technology in Afghanistan and were able to leverage these capabilities to safeguard Americans, locals, and other innocent people in the area.

“The technology has endless capacity if utilized correctly,” he said.

Horsemen Partners is looking to buy a platform for growth in the security industry. They will be active operators in the business, but they’re open to negotiation on several items such as whether the current owner retires completely or stays on in some capacity.

Geographic location is not important. Lahiff and Alaimo will relocate, “whether it’s Billlings, Montana or Austin, Texas,” Alaimo said. And, Horsemen is also not set on a certain type of security business. Alaimo said that eventually whatever business they buy will do alarm systems installations, alarm monitoring, some systems integration, sensor technology and video monitoring—but the business as it stands now “does not have to do it all, it could be any one of these,” Alaimo said.

What Alaimo and Lahiff are looking for is an independent, well-run business that has potential to keep growing. They want a company that’s been cash-flow positive for the past three years, with $5- to $30 million in revenue and some RMR.

“We’re not ADT rolling up a business, we’re two guys who want to buy a private business and take care of it. We’ll stick with the company’s core capabilities but also bring in more—some systems integration, DIY—depending on its capabilities, what is has now and also where the market heads,” Alaimo said.

Horsemen is backed by institutional and individual investors. such as: Anacapa Partners; Search Fund Partners; The Cambria Group Relay Investments; Rich Augustyn & Larry Dunn of NIP Group, a specialized business insurance and risk management intermediary; Tom Cassutt, managing partner of TD Investment Company and David Lazier, managing partner of TD Investment Company;  Doug Tudor
managing partner of Ravenscourt Partners;  Bob Oster a professional economist and banker and private investor; Tim Ludwig, a private investor; A.J. Wasserstein, CEO of Onesource Water; Matthew Burr, general partner at Matland Capital; and, Matt Estep managing partner and founder of Bosworth Capital Partners. The investment company's web site has more information.

 

by: Martha Entwistle - Wednesday, July 8, 2015

Let the integration begin.

With Apollo Affiliated Funds closing on both deals with Protection 1 and ASG, I checked in with Jamie Haenggi, Protection 1 CMO about what's next.

In an email interview, Haenggi complimented ASG CEO Joe Nuccio, saying he's "done a nice job building a company of passionate employees that care about the customer, which mirrors the Protection 1 culture." 
 
Haenggi said Protection 1 CEO Tim Whall is out "is out doing what he does—meeting with the employees of ASG, hosting town hall meetings and sharing insights as to how he looks at measuring the business, taking care of the customer and developing the employee.  The senior teams are working together over the next 30-60 days to devise a detailed integration plan.  As you can imagine bringing together two companies this size is no small undertaking and great care is given to ensure little to no disruption."

Indeed, this is a huge undertaking, but my guess is that Tim Whall and team are up to the challenge. If you look at where the two companies overlap geographically they'll have five or six markets where they'll have huge density on the residential side. I've talked to lots of observers, outside of the ASG and Protection 1, who believe that this will mean very nice efficiencies and margin improvement on the residential side. On the commercial side, ASG was focused on small- and medium business and national accounts. These assets should just accelerate what Whall's been working on for the past few years—becoming the largest independent full-service security company around.

 

by: Martha Entwistle - Wednesday, June 17, 2015

The red herring: Where is Alarm.com in the IPO process now? We got some new information about the Alarm.com IPO on Monday, June 15, when the interactive service provider filed its preliminary prospectus for its IPO. It will offer 7 million shares of Alarm.com for “between $13 and $15 per share,” according to the document. Assuming shares go for $14, Alarm.com will raise $98 million.

Monday’s announcement comes about three weeks after its May 22 IPO S-1 filing with the SEC, which was valued at $75 million. Here’s my report on that filing.

Why did the value of the IPO change in three weeks and what’s the prognosis here? To get up to speed on Alarm.com’s  IPO process and what to expect in coming weeks, I made a few calls to some friendly finance mavens for an IPO primer.

Below is what I learned.

The first step, which Alarm.com took on May 22, is the filing of its S-1 with the SEC. That’s the 250-page tome that commandeered my office printer for a while and is now sitting on a shelf in my office. As part of the filing, Alarm.com has to provide various required documents to the SEC and to the other organizations. They also have to choose underwriters.

Who are these underwriters?  They’re investment banks that agree to underwrite or take risk on the new shares. In the Alarm.com case, the underwriters are –well, about every bank you’ve ever heard of: Goldman, Sachs & Co.; Credit Suisse; BofA; Merrill Lynch; Stifel; Raymond James; William Blair; and Imperial Capital.

What do the underwriters do? It’s their obligation to stand behind the stock in the IPO process. They weigh in on the preliminary prospectus, particularly on the business description. Did I mention that the preliminary prospectus is a second 250-page document, which I did not print out.

Between the S-1 and the preliminary prospectus, the estimated value of the IPO went from $75 million in the S-1 filing to $98 million in the preliminary prospectus. That jump represents what the lead underwriter believes the market will bear.

The preliminary prospectus has another name. It’s called a “red herring.” Not a very flattering name for a document you’re going to base an investment on, if you ask me. But that’s because I didn’t know the third definition of red herring until today.

Here are three possible meanings for a red herring:

1. A smoked fish, which is red and has a pungent smell.
2. Something intended to divert attention from the real problem or matter at hand; a misleading clue.
3. Also called red-herring prospectus. Finance. a tentative prospectus circulated by the underwriters of a new issue of stocks or bonds that is pending approval by the U.S. Securities and Exchange Commission: so called because the front cover of such a prospectus must carry a special notice printed in red.

Now we’re ready for the next step: The road show. “Red herring” in hand, the underwriters and Alarm.com folks visit big cities and talk to investors about how great Alarm.com is.

The roadshow will last one- to two weeks while underwriters "build a book"—that is, compile a list of potential investors. Their goal is to build the book to well beyond what they need to sell. So if they have to sell 7 million shares, for example, they want to get orders of more than 7 million. That’s because in the aftermarket, there are people who may flip the stock for a small profit.

Most of the stock will still be owned by the Alarm.com management and their private equity investors. Those guys cannot sell the stock for a certain period of time—roughly 150 days.

Typically an IPO represents only 25- to 40 percent of the value of the company sold to the public. The public shareholders are the ones who could possibly flip the stock. Still, it’s good to have lots of orders for the stock above and beyond what’s required. It stabilizes the price in the case of flippers.

Once the underwriters are comfortable that the book is robust enough, the IPO happens.

About a week after the IPO, the final prospectus comes out and anyone who owns stock gets this final prospectus.  It is no longer a red herring! It includes information on final commissions, who sold what stock, disclosures about how much the underwriters got paid, and ultimately the net proceeds.

Alarm.com and the underwriters are in road trip mode now. If all goes well the IPO should happen by the end of the month. In the first week or so of July, we should have a new and improved number on the value of the IPO and the fully diluted market value for Alarm.com.

According to the red herring prospectus, the common stock to be outstanding after this IPO will be 44,846,440 shares. The underwriters will get a 30-day over- allotment option to purchase up to an additional 525,000 shares.

 

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