ADT sells commercial business for $1.6 billion to private equity firm

BOCA RATON, Fla.—On the heels of reporting its Q2 financial results, ADT made a huge announcement this morning, entering into a definitive agreement to sell its commercial security, fire and life safety business unit to private equity firm GTCR for a purchase price of $1.6 billion.

Proceeds from the sale, which is expected to close in the fourth quarter of 2023, will be used to reduce debt by $1.5 billion, with cash interest savings expected to offset the impact of divesting the commercial business.

According to ADT, the strategic rationale of selling off ADT Commercial is to “support ADT’s journey to be the premier provider of smart home and residential solar solutions by leveraging our strategic differentiators: innovative offerings, unrivaled safety and premium customer experiences.”

In addition, the company noted that “With a stronger financial profile, ADT will be better positioned to prioritize investments that we believe will drive profitable, capital-efficient revenue growth for the long term.”

Jim DeVries, ADT president and CEO, said, “The decision to divest ADT’s commercial business is a value-enhancing transaction that focuses our portfolio on growth opportunities in our consumer markets. The sale enables ADT to monetize the commercial business at an attractive valuation and accelerate our debt reduction goals. With greater financial flexibility, we will be better positioned to grow through our strategic differentiators and innovative offerings, including our partnerships with Google and State Farm. We will continue our journey to be the premier provider of safe, smart and sustainable solutions that meet the evolved definition of what safety means to consumers today.”

DeVries continued, “This transaction is mutually beneficial for ADT and ADT Commercial, which will benefit from GTCR’s support and expertise, positioning the business to continue providing best-in-class solutions and services to its customers. We thank the entire ADT Commercial team for their hard work and look forward to seeing them grow.”

“Our entire commercial team has been instrumental over the last several years building our commercial business success and bringing a depth of value, experience and knowledge to our customers," added Dan Bresingham, president, ADT Commercial. "We are excited to partner with GTCR, an organization that supports our mission and shares our passion to build this business to become the premier service provider in the commercial security, fire and life safety industry." 

At the close of the transaction, ADT plans to use the net proceeds from the transaction for debt reduction, resulting in a meaningfully lower leverage profile, improved margins and strong free cash flow generation.

“ADT Commercial has established itself as an innovative leader in providing the critical safety services that businesses need to protect their day-to-day functionality,” noted David Donnini, managing director and head of business & consumer services at GTCR. “We are very proud to once again partner with the leadership team of ADT Commercial to continue to invest in the platform and deliver the solutions its customers have come to expect. ADT has done a tremendous job in further developing this segment in recent years and we are excited to help drive the business forward in its next chapter of growth.”

Upon closing of the transaction, ADT expects to receive approximately $1.5 billion in net proceeds, subject to final tax calculations and purchase price adjustments. ADT plans to use the net after-tax cash proceeds of the transaction to reduce debt. As adjusted for the transaction, ADT expects its net leverage ratio to be 3.3, down from 3.7, currently.

The transaction has been approved by ADT’s Board of Directors and is expected to close in the fourth quarter of 2023, subject to customary closing conditions, including regulatory approvals.

Citi and RBC Capital Markets are acting as financial advisors to ADT. Cravath, Swaine & Moore LLP is acting as legal advisor to ADT.