Subscribe to RSS - John Mack

John Mack

Drako-Brivo deal and ‘the new security dealer’

Wednesday, June 10, 2015

There’s been a lot of talk about cloud services and managed services proliferating in the security industry, but “to a large degree it has been a head fake,” according to John Mack, EVP and co-head of investment banking at Imperial Capital.

Many of the so-called cloud products are not true cloud-based systems, and managed services is in it infancy as well, Mack said.
He believes that the news that Dean Drako, owner of cloud-based VMS provider Eagle Eye and founder of Barracuda Networks, has purchased Brivo, the original cloud-based access control system, may help propel the emergence of a new kind of security dealer.

“These guys will be the leader,” he said.

“My guess is that we will see the evolution of a new class of dealer focused on the managed services and cloud-based model” who will do high volumes of business with small- and medium-sized businesses, Mack told me.

The combination of Brivo and Eagle Eye products (the companies will offer an integrated version of their products beginning in July) would provide a “complete solution” for dealers to sell as a managed services offering to the SMB market and multi-site location businesses, Mack said.

This new managed services security dealer would have to be more like an alarm dealer who focuses on RMR as opposed to an integrator who focuses on install revenue. They would also have to be “sales oriented guys not tech-oriented guys,” Mack said.

But, they’ll have to have the technical sophistication to deal with SMB owners, he said.

This model involves high-volume work, which requires capital to subsidize the installation, larger dealers would likely have to secure a lines of credit from banks.
But the RMR would be much higher than the alarm model. It could be as much as a couple hundred dollars versus $40 for an alarm monitoring contract, Mack said. Importantly, the attrition rate for Brivo customers “is meaningfully lower than the 12 percent you hear about [in the residential market],” Mack said.

“It will be a great business model that can create a ton of value for dealers,” Mack said. With a lot of managed services RMR, that dealer would be an attractive acquisition target for ADT, Stanley, Protection 1, and Diebold that want to increase their presence in the SMB and multi-location business market.

Who knows, Mack surmised, the future may find a Monitronics-type business that runs a dealer program and buy accounts from security dealers who sell Eagle-Eye/Brivo-type products. “That would take bank capital- raising out of the equation.”

“A lot of positive things for dealers could spin out of this business model,” Mack said.

Imperial Capital advised Brivo in the deal.


Drako pays $50m cash for Brivo

Barracuda Networks and Eagle Eye Networks founder buys cloud-based access control company, said move to cloud-based systems is accelerating

AUSTIN, Texas–Dean Drako, founder of Barracuda Networks and Eagle Eye Networks, today announced his purchase of Brivo Systems for $50 million cash.

Anixter to acquire Tri-Ed for $420 million

Anixter gets branch network, 20k dealers, intrusion and fire capability, access to resi and small business sector

GLENVIEW, Ill.—Today, Anixter International announced that it will acquire Tri-Ed for $420 million, so now Tri-Ed, which had aspirations to become a "billion dollar distribution business," will be part of a $1.7 billion security distribution company.

Interface raises $115m

Installations for new retail customer with 8,000+ locations begin this month

ST. LOUIS—Interface Security Systems, an integrator that offers physical security with managed network solutions in a bundled service, has raised $115 million to fund growth that includes adding an important new retail customer.

ADT to acquire Protectron for $500 million

Imperial Capital’s John Mack: Agreed upon deal is ‘far and away’ the largest deal for ADT as independent company

BOCA RATON, Fla.—In what will be its largest acquisition as an independent company, ADT has agreed to acquire Canada-based monitoring giant Protectron in a $500 million deal, giving the company another 400,000 customers north of the border.

Kastle Systems acquires monitoring station, Mutual Central Alarm Services from ADT

Deal adds 4,000 customer sites, Stat-Land Security Systems and UL-listed Five Diamond Certified monitoring station

FALLS CHURCH, Va.—Kastle Systems International added 4,000 customer sites and a new, highly specialized UL-listed Five Diamond central station in New York City with the Nov. 21 acquisition of Mutual Central Alarm Services and Stat-Land Security Systems from ADT.

Interface completes $230m refi, gets new $45m revolver

Imperial Capital advises, predicts more high-yield bond deals

ST. LOUIS—Interface Security Systems, based here, last week completed a $230 million bond deal and also secured a new $45 million revolver from Capital One.

Devcon's past mistakes, future promise at Imperial Capital's SIC

Wednesday, December 19, 2012

It was a very full day at the Imperial Capital Security Investor Conference on December 13. Starting before 8 a.m. with John Mack’s “State of Security Finance/M&A Markets” and wrapping up at 5:30 with a very cool panel discussion on BYOD—a great discussion topic, which should be a cause for concern for integrators, manufacturers, and end users alike. We’ll have more on this topic at TechSec in Florida, Feb. 5&6, 2013. Check out this link.  

During the course of the day I heard some cybersecurity experts prognosticating about some frightening stuff and also  listened to presentations from 13 companies (there were 60 presenting throughout the day.) The sessions I saw ranging from systems integrators like Dakota Security to manufacturers like and interesting start-ups like Quylar and Applied DNA Sciences.

The format is efficient. Session are 20 minutes and because the presentations are designed for investors, they are refreshingly free of long diatribes about how much more maniacly obsessed XYZ company is with customer service than ABC company.

Early in the day, at the Devcon presentation, Devcon’s chairman of the board, Christopher Munday, spoke frankly about the company’s challenges in the past couple of years—including an ill-fated branch expansion.

He confirmed that the company is actively seeking a buyer and has hired Imperial Capital to "review strategic alternatives." Munday shared several operating and financial metrics to support his assertion that the company is on strong footing.

In 2010 and 2011, Devcon hired many former Brink’s Home Security dealers and quickly opened up 50 branch offices around the country.

That move was a mistake, Munday said. “In 2010 and 2011 we tried to fast-track the company. That did not work,” he said.

Today, Devcon has gone back to its “core business.” Munday said it has spent the past eight months realigning costs and reassessing its regional structure.

Based in Hollywood, Fla., the company now has 11 branches, eight of which are in Florida. It has 136,000 customer sites, 547 employees and $4.3 million in RMR.

While Devcon and Utah-based Pinnacle Security are both owned by Golden Gate Capital, the two are “separate companies with separate debt facilities,” he said.

Devcon’s business mix is 46 percent residential, 35 percent commercial and 19 percent homeowner associations. Its attrition rate varies by division, but is 11 percent across the business.

While Pinnacle does door-to-door sales, Devcon’s residential sales require an average of “1.7 to 2.3 visits—it’s a slower, controlled sale,” Munday said. Those residential accounts typically have a $200 to $225 upfront investment from the customer.

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 has many high-end retail customers, and Stat-Land, which services mostly commercial customers in and around Staten Island.

Recent changes have not affected Devcon consumers, Munday said.

The past few years have included investments in “enhanced business intelligence systems.” Those technology investments and software systems could “support tremendous growth nationwide, should [a new owner] choose to do that,” he said.

“After the uncertainty, there is positive momentum at Devcon,” Munday said.

Tri-Ed/Northern acquired by private equity firm

Audax Group acquires, Comunale says goal is to build a 'billion dollar business in 3 to 5 years'

BOSTON—Audax Group, a $5 billion private equity firm based here, announced April 4 that it has acquired Tri-Ed/Northern Video.