Ten short, thought-provoking trends that are driving Integrator and Alarm company business
Dave Sylvester, Davis Mergers & Acquisition Group. July 2021
Here are ten trends to help you plan for the future of your businesses, the overall physical security industry, and general dynamics in the world around us. Please give me a call directly if you would like to discuss how any of these topics may affect your business.
— Dave Sylvester, 317-418-5576.
1 A Capital Gains tax increase is highly likely to pass which will impact the owner’s net benefit on the sale of any business. Keep more of your hard-earned money. While we cannot be sure of the timing, it is something to think about.
As always, feel free to call me directly if you would like to discuss any of how these topics may affect your business.
2 Industry consolidation dynamics. Could your company be left out of the largest trend in the industry? There is some consternation as to where the integrator segment of the industry is headed. Considering the growth by large consolidators that has already taken place, the possibility for larger candidates to be stymied, and smaller companies to be considered. Be part of the dynamic changes or be left out?
If this is a concern or seen as an opportunity, just give me a call to discuss further.
3 Who is buying fire and security integration companies? Public companies, PE companies with a security or fire portfolio looking to expand, PE companies looking for a platform company, PE backed searchers, regional and super regional integrators looking to expand their geographic footprint.
We are generally aware of major changes in the integrator side of the industry, and more than likely will be able to share some information with you. We can also answer any questions about our current listings, or the background driving some of our previous transactions.
4 We are in a sellers’ market. There are more companies trying to buy than there are sellers. Mostly, this is happening because of the diminished number of security and fire integrator candidates in the market. Which What that means for you is the opportunity to getting top dollar valuations for sellers your company in today’s market.
We can help you understand this concept better and help you to develop a longer-term transition strategy or position your company for maximum value. in today’s market.
5 Exit strategy planning and timelines. Have a three- or four-year view of a retirement target. Consider that it may take one year to complete the transaction and that the buyer would like the seller to stay involved for at least two years, means you taking a three-year view of a retirement strategy. Plan ahead!
We have earned the industry’s respect for both our deal making as well as conducting processes with the level of professionalism you would expect from us.
6 Demographics. What is really driving the consolidation actions today? Over 90% of the deals being done today and in the next ten years are driven by a business owner reaching retirement age. Of those only 20-30% have a succession plan that involves family or management buy outs. The rest are looking for an exit strategy.
The Baby Boomers (about 70,000,000 of them) are poised to make a great impact on the American economy.
- Retiring Boomer business owners will sell or bequeath $10 trillion worth of assets over the next two decades.
- These assets are held in more than 12 million privately owned businesses.
- More than 70 percent of these companies are expected to change hands.
- The sale of almost 12 million businesses over the next 10 to 15 years represents a significant increase in the annual number of businesses that will be sold.
If you are part of the baby boomer business owner generation, give me a call to discuss the dynamics driving the changes and how you might benefit.
7 Selling a business is a process. Most sellers are first time sellers. Most buyers are professional buyers. Our previous clients would say one thing. Use a business broker to maximize the net owner outcome of a transaction.
We DMAG will market the your company, help clean up its financials, build your legal and financial teams, and guide sellers you through the DUE diligence process. DMAG will assist you in realizing Realize the your optimal outcome.
8 Home automation and integration channels and services are blurring. Take advantage of technology developments and be on the forefront of the change opportunities. As business brokers, we have the opportunity to see firsthand many different business models. In many cases we see the opportunity to “connect the dots” between existing businesses and business models and developing opportunities.
9 Recurring contractual revenue or RMR increases the value of any business. The basis for business valuation is confidence in future cash flows. The more a security or fire alarm integration create a recuring revenue stream the higher the confidence in future cash flow. Increasing hosted services, test & inspection revenue, cyber security services, and contractual support all drive the value upwards.
The team at DMAG is familiar with many business models for Integrator and Alarm companies and can help you plan ways to increase your RMR and the value of your business. We have pioneered a hybrid valuation approach for businesses with a mix of RMR and EBITDA valuation drivers.
10 In many of our workshops and writings we talk about the concept of “Run your business like you intend to sell it tomorrow” — whether you do or do not. Stay current with your financial systems, ensure your management team is a mix of tenured and younger talent, analyze the sources of your revenue so not all your eggs are not in one basket, take actions to create confidence in future business performance (cash flows), and be aware of your company’s culture and ensure it attracts and retains the top talents in the industry.
We hope these ten topics have been thought-provoking and beneficial for your Integrator or Alarm business. Davis Mergers & Acquisistion Group is here to help you in any way we can. Please don't hesitate to give me a call to discuss these topics. Dave Sylvester, 317-418-5576.