Will the new administration be good for security?

YARMOUTH, Maine—As with every change in administration, the impact, either good or bad, on the security industry is something that has been hotly debated in this column before, and one that is at the heart of this month’s News Poll.

The SolarWinds cyber incident has put additional stress on the urgency to shore up our national cyber defenses, and the new administration has made a number of appointments to bolster national cybersecurity, possibly signaling a renewed focus on both cyber and physical security.

While more than half of news poll respondents (56 percent) said the government will spend more on security/cybersecurity – just 26 percent see no increase with the remaining 18 percent not sure – readers were divided on the overall impact the new administration will have on the security industry, with 30 percent saying the impact will be “mostly positive” and 32 percent saying “mostly negative.” Interestingly, 38 percent see “very little impact.”

“The divide and unrest caused by improprieties and business as usual by most politicians will fuel nefarious actors,” noted one respondent. “It’s good to be in security!”

Another reader agreed, adding: “I believe with a divided country and regulations coming from Washington the market for security is going to be higher.”

Looking at the new administration’s impact on the security M&A market, readers had strong opinions on what this could mean, with 53 percent feeling the M&A market will get tighter, 24 percent seeing the market opening up with higher multiples and the remaining 24 percent expecting very little change.

“We will see inflation and regulation play a major role in the marketplace,” said one respondent, who felt the market would get tighter. “The only good crime will continue to rise.”

Troy Deal of Central Florida Alarm Services, who feels the market will get tighter, believes the proposed tax changes “will be a bigger factor in accelerating M&A activity than multiples,” he said. “Tax rates will be more determinate than multiples in calculating how much money a seller actually gets to keep. This will result in more sellers than buyers, which will lead to some multiple compression. The industry proved it’s resiliency during 2020, which caught the attention of investors, and will help generate funding for M&A activities.” 

Another respondent added, “New tax laws and more shutdowns will cause further cancellations and less market share in commercial markets. Residential impact will increase with further automation rather than security.”

One respondent, who said the market should open up with higher multiples, pointed out, “Take the Presidential map for the last five presidents, and valuations in our industry are high during the Democrat administrations and in the tank during Republican terms. Purely a coincidence. I guess we will see. Sixty-five times (65X) cash for CSG in 2005 is one of the few outliers during George W’s time as President.”