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by: Leif Kothe - Wednesday, May 21, 2014

The PERS market has become somewhat notorious for its lack of acquisition activity, a surprising reality given the demographic trends in America that appear to favor such a market.

Many industry watchers on the private equity side attribute the lack of acquisitions to valuations that have yet to ripen. Some hold that as churn decreases, generating longer average account lives, outside investment is bound to pick up. With greater scale and higher multiples, the acquisitions will follow.

Enter Stonehenge Growth Equity Partners, a Tampa-based private equity firm that recently invested an undisclosed amount in MobileHelp, a mobile PERS provider based in Boca Raton, Fla.,—this according to multiple reports, including an article form the Tampa Business Journal.

Stonehenge summarizes its investment strategy on its website, noting that it typically invests in growth stage businesses and “aims to catalyze rapid growth of companies in up-and-coming markets.” The firm also says its typical investment size is between $1 and $5 million, and that it typically targets companies that have at least $3 million in revenue and are profitable.

Like many investment firms, Stonehenge likes the recurring revenue business model.

No question, then, that MobileHelp fits many of the firm’s ideal investment characteristics. Henry Edmonds, president of The Edmonds Group, an investment bank in St. Louis, said it’s very good news that private equity investors are supporting PERS businesses. He added that it’s unsurprising Stonehenge chose to invest in MobileHelp, which Edmonds characterized as a “leading provider of mobile PERS solutions,” that has distinguished itself in an increasingly competitive market.

“I think we’ll see a lot more of this as people get beyond the early stage and nascent products and once they’ve established a niche in the industry as MobileHelp has done,” Edmonds said. “I think it will be likely that these kinds of companies will attract new capital, because it’s an exciting space.”

He described the PERS and mobile PERS market as “the wild wild west,” in a certain sense, because there are a lot of products currently vying for attention.

“But if you can rise above the fray as MobileHelp has done, it’s a great opportunity because of all the current and expected growth in mobile PERS and mobile security,” Edmonds said.

I’ll be following up on this story in the coming days. I plan to piece together an article about the implications of this investment, bringing together the perspectives of MobileHelp, Stonehenge, and others on the private equity side who’ve been monitoring the PERS valuation market for some time now.

by: Leif Kothe - Wednesday, May 14, 2014

Good news for Ascent Capital, the parent holding company of Monitronics, according to a recent research report conducted by Imperial Capital’s Jeff Kessler. The takeaway is that the monitoring company’s Q1 2014 earnings—$484 million in revenue, EBITDA of $321 million—were consistent with estimates and the company is “not experiencing impact from the entrance of cable/telcos."

As a result, Imperial Capital is maintaining the outperform rating and one-year price target of $94, about 43 percent above the company’s recent share prices, recorded in the report at $65.80.

The share price is being impacted currently by skittishness surrounding the big new market entrants, referred to as a “false negative perception about the competition from cable/telcos.”

“We believe that Ascent remains fundamentally strong and is not seeing any slowdown as a result of cable/telcos entering the security space,"  the report says.

As far as the new competitive landscape, Kessler believes traditional security companies remain Monitronics’ primary competitors. He also envisions something of a schism taking place between traditional large security companies and the newcomers who established themselves first in other industries.

The former, according to the report, will continue to command their share of business in the market for critical life safety systems, while the latter will bring to market more of a “home services,” lifestyle-focused package. The report said that existing skepticism about the “commitment to service” of the cable/telcos could hinder their ability to gain share from the largest security providers.

Kessler’s report was extremely thorough, full of many fascinating prognostications about not just Monitronics but the industry at large. Needless to say, a lone blog post can hardly do it justice. Here’s a sample sentence from the report that certainly piqued my interest:

“We believe smaller, undercapitalized security companies who do not have the capital to install Alarm.com or iControl wireless interactive systems may face real competitive threats.”

The report also touched on the implications of the enormous advertising budgets of the new market entrants, as well as the positive effects of Monitronics’ acquisition last August of Security Networks.

by: Leif Kothe - Wednesday, May 7, 2014

Video verification in the residential market—it was a topic that surfaced in some of the PPVAR panels I attended at TechSec, though the discussion had been picking up momentum well before that.

It really seemed to pick up last August, when Honeywell Security announced it was joining the membership ranks of PPVAR, a move that some saw as a sign of the “mainstreaming” of video verification.

That seemed to be the gist of Scott Harkins (president of Honeywell Security Products Americas) words in the prepared statement released at the time, in which he said Honeywell recognized that “video verification is an important product category as we look to the future of security.”

Harkins, who was a panelist at one of the PPVAR sessions at ISC West, for the most part reiterated that sense of optimism, saying there was indeed potential for video verification in the residential space. He did however add the caveat that, from Honeywell’s perspective, bringing the technology into the mainstream had to be done in a way that keeps such systems affordable to a mass residential market.

Keith Jentoft, president at Videofied - RSI Video Technologies and an industry liaison for PPVAR, has given me some leads in recent weeks about a few monitoring companies that are striving to fulfill the vision put forth by Harkins (EMERgency24, based in Des Plaines, Ill., is one of a few he’s mentioned).

In the days and weeks ahead, I plan to explore how some of these companies are taking video verification to a broader residential market, zeroing in on the strategies that have worked as well as the challenges. 

by: Leif Kothe - Wednesday, April 30, 2014

ESA just wrapped up its annual Day on Capitol Hill, bringing to the attention of lawmakers several topics of consequence for the security industry, including school security.

The ESA has positioned itself as a partner with Security Industry Association in developing a comprehensive guide to help end users and legislators better understand what electronic security technologies they have at their disposal to bolster school security.

“Most school districts don’t know what type of security to install, and many legislators don’t understand all the technology that’s out there and what exists,” said Daniel Gelinas, who attended the event in his capacity as government liaison for Rapid Response Monitoring. ESA’s Electronic Security Guidelines for Schools, he said, were designed as an authoritative resource to address that knowledge gap.  

The timing of the school security guide is especially good, in light of the latest appropriations act cleared by Congress in January, which contains $75 million in funding for assessing methods to improve school security.

But ESA’s activities on the Hill weren’t limited just to school security matters. The association and industry members are also pushing for expanding the industry’s access to the FBI’s background check database, allowing security companies to better vet their employees for prior criminal activity.

Gelinas said the pair of bills addressing this (one in the House, another in the Senate) would not be a mandate. Rather, if enacted, they would allow security companies in the 26 states without the licensing requirement for the database to access it.

The organization was also in the Capitol promoting funding measures that would protect against elderly abuse through expanded use of video surveillance in nursing homes. Gelinas noted that this would not be a mandate for health care facilities, but would instead give concerned families the option to use electronic security systems to ensure that elderly relatives are getting proper medication and care.

The final area of focus for ESA was getting Congress to back a balanced approach for smoke alarms and other early fire detection systems, putting them on “the same footing as sprinklers” when it comes to receiving tax incentives and government grants, Gelinas said. That would involve amending the Fire Sprinkler Incentive Act to include life safety, fire and smoke alarms.

I plan to give more space to this final issue, and some of the aforementioned ones, in an upcoming legislative roundup.

by: Leif Kothe - Wednesday, April 23, 2014

Greater visibility, broader market acceptance and (for some central stations) more wholesale monitoring accounts are just some of the benefits often mentioned in connection with the entrance of cablecos and telecoms into security.

A recent Wholesale Monitoring study by the Barnes Associates (co-sponsored by the CSAA and SSN) largely attributed the 19 percent growth the segment enjoyed in 2013 to the influence of the new entrants. To be sure, there seems to be a prevailing belief that the rangy, big-money advertising campaigns of such companies can be the proverbial “rising tide that lifts all boats.”

That’s not to say there’s no ambivalence. That was apparent enough in a recent SSN News Poll that dealt with the topic. A number of readers expressed concern about the long-term viability of smaller players in the home security space, given the influx of these major corporations who have already made inroads into the home through Internet and cable, and thus have that previously established “stickiness.”

That ambivalence was also reflected in a recent analysis by Rajiv Bhatia on Seeking Alpha, a crowdsourced platform for investment-based ideas, who discussed what the new market players could mean for Ascent Capital, the holding company of Monitronics. Bhatia acknowledged that the company faces “increased competition” from the large new cableco/telecom entrants, which he says are gaining traction despite unsuccessful forays into the market in the past.

Regarding Monitronics’ business model, Bhatia offered a mixture of encouraging and somewhat cautionary words:

“While management and sell-side analysts believe that Ascent is better insulated from competition via its dealer-only business model, Ascent faces upward pressure on the multiple it pays for its dealer contracts from competitors. Additionally, its growth through its internal channels is weakening.”

Those multiples, he noted earlier, are based on an RMR multiple of 50. Ascent faces “upward pressure on the multiple it pays to acquire contracts,” he said.

With more than 1 million subscribers, Monitronics trails only ADT in terms of marketshare in the alarm monitoring space. It will be interesting to watch what happens to the market presence of both companies as the cableco/telecom ads continue to appear on our television screens.

by: Leif Kothe - Wednesday, April 16, 2014

Alarm Relay, a UL-listed alarm monitoring company based in San Diego, became the latest central station to earn Five Diamond Certification from the Central Station Alarm Association, the company recently announced. Fewer than 200 central stations in the country have the certification.

Among the most rigorous requirements for completing the Five Diamond program include the commitment to random inspections by a nationally recognized laboratory, such as FM Global, Underwriters’ Laboratories or InterTek/ETL, and central stations must also comply with quality criteria standards developed by those same organizations.

Five Diamond Certification also testifies that 100 percent of central station operators at a given company have been certified through the CSAA online training course, which covers all phases of central station communications with law enforcement, customers, and fire and emergency centers.

For an operator to achieve certification, they must demonstrate (among other things) proficiency in alarm verification, which helps reduce false dispatches, and in communications with Public Safety Answering Points.

That latter requirement is bound to be vitally important as central stations around the country forge more partnerships with PSAPs, allowing the ASAP to PSAP program to expand. 

by: Leif Kothe - Wednesday, April 9, 2014

Several months after Monitronics acquired Security Networks in a $507 million deal, the company has officially incorporated the more than 200 Security Networks dealer affiliates into the Monitronics dealer program, the company recently announced.

This phase, which will go down as one of the final steps of the integration process, brings the number of Monitronics dealers to about 620, making it one of the largest networks in the country. The company says it will provide monitoring services to more than 1 million customers out of its Dallas-based central station.

Bruce Mungiguerra, Monitronics’ VP of operations, said in the statement that merging businesses is “never easy,” but that “the hard work of many groups across both companies has kept things as organized and efficient as possible.”

Also being brought into the Monitronics fold are 60 field technicians who previously serviced Security Networks accounts across several regions, bolstering the company’s network of field service dealers.

by: Leif Kothe - Monday, March 31, 2014

ISC West 2014 - Day Three

After spending much of my career in the medium of print, I managed to make my on-camera debut at ISC West 2014, interviewing several folks from the central station side who provided some lively perspectives about the show and the direction of their respective businesses.

First up was Jim McMullen, president and COO of COPS Monitoring, who said the company had around 800 dealers at its annual Dealer Appreciation Bonanza, an event I also happened to attend with several SSN colleagues. He wasn’t lying; Gilley’s was thronged, and there was no shortage of attendees eager to duke it out in the mechanical bull riding competition, a contest for which the event has become well known. The Bonanza has become a marquee event for CO, McMullen said, and has proven to be another way the company goes about forging strong relationships its dealer base.

In my next interview, Josh Garner, CEO of AvantGuard Monitoring, discussed the company’s new monitoring center in the rural community of Rexburg, Idaho. Garner characterized the new facility as a human capital investment, as the company aims to leverage the community’s young and well-educated workforce (Brigham Young University has a campus in the town). We also talked about AvantGuard’s success in the mobile PERS market and the company’s PERS Summit Network, which has an educational component that takes a “granular” approach to equipping dealers with the knowledge they need to run a successful PERS operation.

My final on-camera interview of the day was with Hank Groff, SVP of sales at Dynamark, and Tom Piston, VP of business development. The duo explained the philosophy behind Dynamark’s recently launched partner program and discussed the company’s highly focused, customized approach for ISC West.

I also met briefly this morning, off camera, with Barry Epstein, president of Dallas-based investment firm Vertex Capital. We discussed the late 2013 Security Partners acquisition of Mace Central Station (a deal in which Epstein represented Mace) as well as the PERS valuation market, which remains intriguing (and well worth keeping an eye on) but relatively inactive.  

And that just about does it for ISC West 2014. Keep an eye out for our show roundup, which we’ll include on the newswire next week.  

ISC West 2014 - Day Two

The second day of ISC West had the same frenetic energy and pace as the first—which is maybe fitting for a day that for many began with the Security 5K run. My opening meeting of the day was with I-View Now, who hosted a forum for several attendees. I-View’s Steve Patterson, chief information officer, and Matt Fleming, chief technology officer, highlighted some of the company’s new initiatives, which include the a newly launched cloud analytic, and discussed the company’s push to form additional partnerships with some big name manufacturers. The two also touched on sales strategies for video verification, which can contribute an additional $35-50 in RMR for monitored accounts, according to Patterson.

Patterson noted that demos are a critical component of the sales process for video verification. I-View Now has developed a demo portal that can act as management tool, demonstrating the correlation between video verification demos and successful sales.

I returned to the show floor for my second demo of the day, this one led by Aaron Salma, at Union, N.J.-based Affiliated Monitoring. Salma showcased the e-contract functionality on the company’s new dealer app, which allows technicians to efficiently manage their accounts. Salma said the app can be enormously beneficial for businesses employing a summer sales/door-knocking model.

In the afternoon I made my way up the Venetian Tower where I joined Kevin O’Connor, president of LogicMark, and Troy Bruce, director of sales, to discuss the company’s newly released mobile PERS offering, the SentryPal, as well as its new traditional unit, the Caretaker Sentry. Both emphasized the need for PERS products (and the security industry at large) to remain grounded from a practical standpoint despite rapid technological advancements.

O’Connor believes even a less tested market like mPERS holds considerable promise. That market, he said, may evolve much like the security industry in general, continually adding new functions that central stations and dealers can translate into more RMR.

While the sheer numbers of America’s aging Baby Boomer demographic bode well for anyone in the PERS space, security companies still need to develop a sound strategy for bringing the product to market, managing the expectations of customers and efficiently redeploying their units, they noted. Interestingly enough, both agreed that security companies, if the resources are there, do themselves a favor by creating a separate division for bringing PERS to market.

My afternoon concluded with back-to-back PPVAR panel sessions, the first of which distilled several outside-the-industry perspectives on video verified response. The session, moderated by Steve Walker, VP of Stanley Convergent, president of PPVAR, featured representatives from law enforcement and private insurance.

The next session, moderated by Don Young, CIO of Protection 1, VP Stanley Convergent representatives from the manufacturing side (Scott Harkins, president of Honeywell) and the central station space (Chuck Moeling, executive VP of sales at Interface, and Tony Wilson, president of CMS), together with representatives from the private investment and legal arenas.

An interesting topic raised by the panel dealt with the potential of video verification in the residential security space. Moeling pointed out that there are considerably more barriers to establishing a foothold in the residential market (as opposed to commercial) in North America. One of those barriers, he said, is the “basic nature of American independence” and customers being leery of having “big brother watching.”

Though Harkins believes there is potential for video verification in the residential space, he added the caveat that, from Honeywell’s perspective, bringing the technology to a mainstream market has to be done in a way that keeps such systems affordable to a mass market. 

ISC West 2014 - Day One

Though access control resides a little outside my coverage domain, my first ISC West stop was at Assa Abloy’s booth for a morning press conference. It was an impressive showing from the company, whose president of access and egress hardware group, Martin Huddart, delivered a presentation outlining the company’s past, present and future.

Huddart keyed in specifically on the company’s transition to a new line of “2.0” solutions. The presentation touched on several on several of the company’s newer and more sophisticated solutions: Access credential technology that sends keys “over the air” through smart phones, “futureproof” maglocks that support several different credential strategies (NFC and Bluetooth among them), and the company’s EcoFlex locks.

The latter, according to David Sylvester, president, door security solutions at Assa Abloy, was a major point of attraction for the sustainability officer at Amazon, which plans to use the locks at its new headquarters.

I spoke with Michael Schubert and Woodie Andrawos, president and executive vice president, respectively, of National Monitoring Center, which is fresh off announcing the opening of a new 25,000-square-foot facility in Lake Forest, Calif. Both characterized the facility as a substantial technological upgrade that amply accommodates for future growth. NMC now has two central stations (the other is in Texas), and Schubert said, down the road, the company may explore the possibility of getting another, ideally in a new time zone.

I had the chance to meet early in the day with Gary Shottes, president of AES Corporation, and Candyce Plante, senior director of marketing at AES. We spoke at length about the company’s patented wireless mesh technology, some new developments at AES on the product front (stay tuned for that), and the ramifications of the 2G sunset—an industry inevitability from which a company like AES is well-positioned to prosper. Already seeing gains from clients keen on “futureproofing,” the company could thrive even more when the 3G sunset occurs, according to Shottes.

The 2G sunset proved to be a theme that found its way into some of my afternoon discussions as well, particularly in my conversations with some folks at Uplink, whose software solutions are geared to mitigate some of the adverse effects of network obsolescence.

I also spoke with Telguard’s Shawn Welsh and Pam Benke (VP of business development, director of marketing, respectively) about their launch, today, of their OneRate service plan for their HomeControl platform, which replaces the company’s previous multi-tier pricing structure with a single flat price.

The plan, according to Welsh, goes along way in terms of “demystifying” the sales process for customers, and he believes the simpler, pared down approach will give sales personnel a considerable advantage when trying to sell home automation in conjunction with security products. The service plan also includes a reseller price that allows central station partners to “make margins bundling the service,” Welsh said.

A recent report from ABI Research shed light on the notion that the industry is still in the laboratory phase as far as figuring out the best way to bring home automation to market. There’s still a fair amount of tinkering and experimentation going on, the report noted, and this simplified (and innovative) service plan from Telguard seems indicative of that.

Once again, as I’m wont to do at trade shows and other industry events, I’ve stretched this blog a bit beyond its ideal length, so that’s all for day one. I have a slew of meetings and interviews tomorrow, which I’ll provide updates about during the course of the day.  

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Like thousands on the east coast, I’ll be flying west tomorrow to Las Vegas, where I’ll be spend the following three days at ISC West, trying to gauge what those in the central station arena are finding compelling about the marquee show.  

Judging by conversations I’ve had with members of the industry over the past several weeks, there should be no shortage of new developments at this year’s show. Days after booking my ticket to Vegas I was hearing about new central station automation software, a cloud- and algorithm-based video verification platform, the launch of new mobile apps for dealers and technicians, and manufacturers warming up to mobile PERS.

Basically, I’m expecting an aggressively forward-thinking show, and, since I’ll be updating this blog over the next three days, you’ll be able to see to what extent that presentiment is realized.

I want to encourage readers to take up the opportunity to meet with me and my colleagues—SSN editor Martha Entwistle; SSN managing editor Tess Nacelewicz; and Amy Canfield, managing editor of our end user-focused sister publication, Security Director News—at our “Meet the Editors” event at the show. This is scheduled for Wed., April 2 from 9:30 a.m. to 10 a.m, and will be held at the SSN booth, adjacent to the ISC West Media Stage, which is located directly outside the main entrance doors to the show floor.

I very much look forward to meeting our readers in person, so please feel free to stop by!

by: Leif Kothe - Wednesday, March 26, 2014

Brett Springall, formerly the IT director at Security Central, and one of the key architects of the company’s soon-to-launch total solution, has been named the managing director of the Lake Norman Security Patrol, of which Security Central is one of three divisions. Springall’s promotion marks the first time in the company’s 50-year history that day-to-day management will fall under the responsibility of someone who’s not a member of the Brown family, according to a statement from the company.

Ellen Brown Meihaus and Courtney Brown, the company’s CEO and COO, tend to promote people strategically from within the company, according to the statement. The two will continue to be highly visible at the company, though the release noted that they considered now “the right time” to begin shifting control over to a new managing director.

The Brown family figures to remain pivotal in terms of shaping the company’s direction—not only through the continued involvement of Meihaus and Brown, but also through the leadership of Caroline Brown, a third-generation family member who currently serves as the company's business development manager. Springall and Caroline Brown, the release noted, are the “future of Security Central.”

According to the release, Springall will wear “dual hats” for a short time during the transition, as the company, under the guidance of Meihaus and Brown, seeks a replacement IT director.

by: Leif Kothe - Wednesday, March 19, 2014

For anyone monitoring the progress of the latest push toward a comprehensive verified alarm standard, there’s a pair of consecutive PPVAR panel sessions at ISC West that are can’t-miss in stature.

The first session, moderated by Steve Walker, vice president of Stanley Convergent, kicks off on Thursday, April 3 in Room 502, and is especially noteworthy because it brings several outside-the-industry perspectives into the same forum. Titled “Insurance and Law Enforcement Review Verified Alarms,” the session illustrates the array of stakeholder groups now influencing the conversation of verification. Among the six panelists are Cmdr. Scott Edson, Los Angeles Sheriff’s Dept., and Anthony Canale, vice president of Verisk Crime Analytics.

The second panel, “Video Verification in the Alarm Industry,” is moderated by Donald Young, PPVAR president and chief information officer at Protection 1. The panel roster for this second discussion is designed to showcase a broad array of intra-industry views on the role of video verification in the alarm industry. Keith Jentoft, an industry liaison for PPVAR, said the lineup will feature representatives from the manufacturing side (Scott Harkins, president of Honeywell) and the central station space (Chuck Moeling, executive VP of sales at Interface, and Tony Wilson, president of CMS), along with representatives from the private investment and legal arenas.

The debate surrounding verified alarms is a fascinating one, and that’s due in part to the general complexity of an issue that involves stakeholders from outside the industry, as well as a host of ideas about the role of verified alarms that dovetail as much as they diverge.

I expect these discussions to generate some high-quality dialog that not only zooms into the subtleties and particulars of verified alarms, but also pans out to ask the big, overarching questions about the role of the industry in general. As the industry evolves, what aspects of the alarm industry as we know it will remain in place? What’s bound to change? What qualifies as a verified alarm, and where do legacy systems fit into the discussion?

These questions may not be asked explicitly, but I expect them to permeate the discussion.  

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