ADT to acquire Devcon Security for $148 million
BOCA RATON, Fla.—The ADT Corp. announced this morning that it plans to acquire Devcon Security from Golden Gate Capital for $148.5 million. The deal—ADT’s first major acquisition since spinning off from Tyco International last fall—brings 117,000 accounts and $3.6 million of RMR. The transaction is expected to close in early August, Naren Gursahaney, ADT CEO, said during an investor call today.
Don Boerema, chief corporate development officer for ADT, which is based here, told Security Systems News that Devcon is a good fit because it has quality customers, employees and operations, and it’s run very efficiently.
Using a golf analogy, he said, “It’s kind of like [a drive] right down the fairway. They’re a perfect match with our business overall when you look at their customer base and when you look at their residential [business] and the kind of small business that they have.”
Devcon will bring its strong relationships with homeowner associations to ADT, and ADT will be able to offer more interactive services to Devcon customers than they’ve had access to previously, Boerema said.
As of December 2012, Devcon, which is based in Hollywood, Fla., had 11 branches, eight of which were in Florida.
Devcon has two central stations, one in Staten Island, N.Y., and one in Hollywood, Fla. While its branch offices do some commercial work, the bulk of its commercial business comes from two New York City-based businesses: Mutual Central Alarm Services, which does large commercial deals, and Stat-Land, which serves many banking and high-end retail customers.
Gursahaney confirmed during the call that those New York-based businesses are included in the sale. Imperial Capital advised Devcon on the deal.
Asked about growth rates at Devcon, Gursahaney said that “Devcon had been growing nicely.” He added that the “Devcon attrition rates, overall, are better than average at ADT today.”
Boerema said ADT bought Devcon from San Francisco-based Golden Gate Capital, which acquired it in 2009. SSN learned last fall that Golden Gate was considering selling Devcon.
Boerema said Devcon’s business is mainly in New York and Florida. He said it can be broken down into three segments: the company’s strong commercial business in New York, its homeowner association business, and its residential business, a mix of traditional approaches and some door knocking. The two residential segments are centered in Florida, he said.
Devcon’s relationships with homeowner associations are particularly appealing to ADT, Boerema said.
“You have a community of homes in a neighborhood and a lot of time they’re gated communities. …You might have 100 or 500 or sometimes 1,000 homes in a neighborhood that would be using the Devcon services and now the ADT services,” Boerema said.
He said it’s a “different model” of selling “because you have to work with the entire community and basically every home would be a customer.”
He said Devcon has “a great business in that overall.” In that model, he said, attrition rates are “very, very good because … basically the homeowners’ association pays for every home [in that community] and they actually collect the payment from every individual home and remit that to us.”
He continued that the homeowner association aspect of Devcon's business is “something we’re real excited about taking on and building on it, and learning from them, and really leveraging their people and their process, and how they actually proceed.”
ADT also will be leveraging Devcon’s more traditional aspect of its residential business, Boerema said. ADT will be offering increased interactive home automation services to Devcon customers, he said.
“They really haven’t entered a lot into the home automation field yet,” he said. “So that’s something that’s great for us and something we can actually bring to the party and make available to all their customers base. … That’s one of the things we’re more advanced on than they are.”
Devcon has partnered with Alarm.com for its interactive services, while ADT has a partnership with iControl for those services. Boerema told SSN, “This is obviously Day 1, so we’ll work through all the solutions and products.” The customer experience will be paramount so if an existing Devcon customer wants to retain Alarm.com services, ADT will make that available, Boerema said.
In a prepared statement this morning Gursahaney said: “In addition to the solid characteristics of the Devcon customer base, we are excited to add Devcon Security’s seasoned sales force and distribution capabilities as well as their highly competent management and operating teams.”
He added, “We operate in a highly fragmented industry and over time expect to see additional M&A opportunities, like Devcon, that could represent value added enhancements to our organic growth.”
Boerema said the challenge for Devcon was that it expanded very quickly into a lot of markets. But now, he said, “they’ve done a great job of really streamlining the business and really focusing … They’re still performing even though they were going through lots of change and we’re excited to keep that momentum going.”
He said ADT has had a couple of small tuck-in acquisitions since it spun off from Tyco but this is “the first really significant one we’ve had.”
Martha Entwistle contributed to this story.
SSN continues to report on this story. Read an interview with Steve Hafen, CEO of Devcon Security.