A rapid string of merger and acquisition (M&A) transactions as 2018 passed into 2019 suggests the physical security industry may be on the verge of a busy year of companies buying other companies. Observers have noted a large amount of investment capital currently available to be invested in security M&A, and plenty of entrepreneurial companies are looking to be acquired. Joe Grillo, CEO of ACRE, previously hinted at upcoming M&A activity for his company by the end of 2018, foreshadowing ACRE’s late-year announcement to acquire access control company Open Options, Addison, Texas.The VaaS cloud-based image capture platform includes fixed and mobile license plate reader cameras driven by machine learning Just days later, in the midst of the holiday season, Qognify announced its plan to acquire On-Net Surveillance Systems Inc. (OnSSI) and sister company SeeTec GmbH. Then came an even larger announcement: Motorola has acquired VaaS International Holdings Inc., a data and image analytics company for $445 million. The VaaS cloud-based image capture and analysis platform includes fixed and mobile license plate reader cameras driven by machine learning and artificial intelligence. Most recently, ADT announced yet another acquisition, Advanced Cabling Systems, a technology integration company in the South, thus continuing consolidation on the integration side of the business. There are likely to be further mergers and acquisitions in the video surveillance supply base in 2019 Continuation of the trend In the case of the Qognify and Motorola deals, Jon Cropley, Principal Analyst, Video Surveillance & Security Services, IHS Global Limited, sees them as the next chapter in an M&A trend going back several years. “I think this is a continuation of what we have been seeing in recent years of video surveillance software vendors being acquired,” he says. In the face of intense price competition, vendors have found it increasingly difficult to compete based on hardware features" “In the face of intense price competition, vendors have found it increasingly difficult to compete based on hardware features and are looking at software to offer unique competitive advantages.” In short, he sees it as a continuation of a trend that previously saw Canon acquiring Milestone Systems and Briefcam, Panasonic acquiring Video Insight and Tyco acquiring Exacq. “There are likely to be further mergers and acquisitions in the video surveillance supply base in 2019,” adds Cropley. “However, a spree of large-scale mergers and acquisitions is not expected.” Memoori, another market research firm, forecasts that the value of acquisitions could actually decline marginally in 2019 in value terms but increase in number. This observation is based on Memoori’s charting of physical security deals over the last 18 years. Jim McHale, Managing Director of Memoori, says there have been four cycles of increase and decline in activity, often exaggerated by billion dollar deals in one year such as the merger of Johnson Controls and Tyco of $165Bn in 2016. Access control when combined with identity management is punching well above its weight, and this trend has continued Access control to open systems Only time will tell whether the new year pattern of M&A activity is a coincidence or a harbinger of a busy M&A year ahead “It may be too early to make judgements on the future based on the last four weeks, but there are some interesting points that can be made when compared with our 2018 analysis,” says McHale. “Access control when combined with identity management is punching well above its weight, and this trend has continued. "Acre has been a major contributor and has completed some 10 acquisitions. In general, the access control business has been slow to move to open systems, and hopefully we can expect this trend toward openness to continue as it will give additional growth to the business.” For more commentary from Memoori, see their report “Major Trends in the Global Access Control Market 2018”. Only time will tell whether the new year pattern of M&A activity is a coincidence or a harbinger of a busy M&A year ahead. While past trends may provide a glimpse of what’s coming, there are always new variables. It’s a sure bet the overall trend toward consolidation will continue but predicting the pace and timing of individual transactions is almost impossible. In any case, it will be interesting to watch how 2019 unfolds on the M&A front, among other factors in a changing industry.
The new All-over-IP topics helped leading global brands stand out on the show floor and highlight the new value for their sales partners All-over-IP Expo 2015, Russia's premier IP event since 2008, welcomed over 4200 local security and IT professionals to Sokolniki Moscow to explore the latest innovations and hear from the best in the industry over two amazing days on November 18 and 19. Sponsored by AxxonSoft, Milestone Systems, Hikvision, Basler AG, Quantum, Dahua, Bosch, GNS/ONCOM, Electronica. Bringing back a sense of awe and wonder: More than 180 leading brands from 20 countries showcased the latest technology to efficiently utilise IT infrastructure and secure assets and people. With the new converged show environment, visitors explored the vast transformation of the IP industry. Identity management, IP access control, open platforms, HD/4K surveillance, video analytics, data storage, IP networks and the cloud were capturing the show floor. Among other exciting debuts, 2N, Canon, Commend, Lex Computech, Morpho, Quantum, Seagate, Vingtor-Stentofon joined the exhibition to accelerate the local IP industry change. Reshaping partner ecosystems: The new All-over-IP topics corresponded to the fastest growing markets in Russia for 2016, and helped leading global brands stand out on the show floor and highlight the new value for their sales partners. Bringing a new definition to developing sales networks, All-over-IP Expo 2015 launched a special initiative having verified and attracted over 1500 key local sales partners to ensure global brands could win and grow in Russia together with the right channel. The number of appointments scheduled online for the show exceeded 8000. Forward thinkers sharing ideas: Visitors took part in education sessions from over 100 industry experts, including Allied Telesis, Basler AG, Bosch, Dahua, Dell, EMC, Hitachi, MOBOTIX, Nedap, Oracle, Quantum, Schneider Electric, Seagate, Sony, Synology, Western Digital to name just a few. Insights for a new era of innovation were delivered to a captivated audience across seven theatres: Identity Management & Access Control; Intelligent Video 2.0/Machine Vision; Storage, Networks, Cloud; Smart City; Bosch Academy; Dahua Academy, Global Keynote Theatre. Due to the new topics and brands introduced in 2015, the percentage of new visitors reached 67%. This is not sci-fi: For two days, inspirational speakers were arguing on the future of the Internet of Things, Smart Cities and Intelligent Buildings that will hit the industry by 2020. Futurists included Peter Lindström from Axis Communications, Andrey Khristophorov from AxxonSoft, Jaroslav Barton from HID Global, Igor Rudym from Intel, Eugenia Ostrovskaya from KiwiSecurity, Maarten Mijwaart from Nedap, Anders Johansson from Milestone Systems and Wayne Arvidson from Quantum. Memoori Founder and MD Jim McHale made a great impression sharing how the IoT would revolutionise physical security and intelligent buildings by 2018. Redesigning IP business: CEO Summit saw big names from big companies take to the stage. AxxonSoft President Murat Altuev talked about his startup days covering most prominent risings and failures. Bosch Director Business Development Klaus Lienland advised on how security and IT integrators could benefit from Industry 4.0. AAM Systems MD Vadim Borisov presented on the global access control trends taking ground locally. Vicon VP Mark Provinsal and Hikvision Marketing Director Ksenia Elokhina stepped forward in time to consider the video surveillance industry of 2016 and beyond. Take advantage of All-over-IP 2016 Russia early-bird prices until December 18, 2015 and book stands, timeslots and sponsorship today!
This year's IFSEC International show in London will provide a reflection of the physical security industry's rapid growth, especially in the video sector, says one industry observer who is also a speaker at the show, coming up 16-18 June. “If we look at the overall trend, it is no surprise to anyone that IP is driving the growth and the future of the security business,” says Jim McHale, managing director of research company Memoori, and a speaker at IFSEC. Security industry estimates Memoori's latest report on the security industry estimates a total worldwide market value of $25 billion, showing a growth rate of 7.5% in 2014. “The market is being driven by what’s happening in video,” says McHale. “The three main drivers for growth are IP video networks, higher demand from Asia, and greater success in selling into vertical markets such as transport, retail, healthcare and education.” According to Memoori, video accounts for approximately 53% of the total market at $13.5 billion, access control takes a 23% share at $5.6 billion, and intruder alarms at $6.2 billion take a 24% share. The developed markets of North America and the EU are losing market share to Asia – in particular China – which will be the largest single market by the end of this decade. Growth in the sales of access control systems increased by 10% in 2014 as the sector moved into IP network systems and there was strong growth in biometric and identity management systems. "The market is being driven by what’s happening in video. The three main drivers for growth are IP video networks, higher demand from Asia, and greater success in selling into vertical markets such as transport, retail, healthcare and education" Security systems for greater business value The use of security systems and the position security has in an organisation is also affecting buying trends, says McHale. “Security should be more than just a cost centre; it should be adding value to the business by optimising processes. This will require a fundamental change in perspective from both end users and suppliers and a greater understanding of how security will fit into the wider Internet of Things in both cities and buildings. I expect to see more integration of systems at IFSEC this year.” This move to optimise systems beyond security is not a quick process. “I don’t think we’ve reached the point yet where your average security manager is really thinking about how they can use their system to optimise business processes. But there are early adaptors such as data analytics in retail, people counting and heat-mapping, giving valuable insights into the retail environment.” High growth in Asia Moving to an international context, McHale sees strong growth in Asia and expects this to be reflected in a larger representation of Asian companies at IFSEC, especially video surveillance companies. They have done very well in their domestic markets but are looking to grow in Europe and North America. Like the rest of the security industry, intruder alarms are also following the trend towards IP. “There is a trend across the whole security business towards IP. With a 24% share of the total security market, intruder alarms are still a significant share of the business but the sector is not growing as fast as the others.” Market participants As far as the surveillance sector is concerned, growth through innovation has come from "middle market" players – such as Avigilon and Axis Communications – rather than the major conglomerates, which have seen a decline in their share of the product market. The developed markets of North America and the EU are losing market share to Asia – in particular China – which will be the largest single market by the end of this decade. “Are the major conglomerates losing interest in the security market?” asks McHale, citing the sale of Siemens’ security products business to Vanderbilt and Ingersoll Rand’s spinoff of Allegion. Most conglomerates have made major acquisitions in their other businesses and they have significant cash reserves on their balance sheets. In contrast, Canon is now showing serious interest in video surveillance with its acquisitions of Axis Communications and Milestone Systems. “Security manufacturers now need to look towards the Internet of Things and understand how and why their products / services will fit into this new world of ubiquitous sensor networks,” concludes McHale.