ALLCASTLE PRINCETON + Zicom Electronic Security Systems

Trading Conditions Marginally Improve and Consolidation Activity Continues to Grow in the First Quarter of 2017

In the first quarter of 2017 the number of acquisitions announced has grown by 50% on the same period of 2017 and has more than doubled based on the cost of buying. This trend looks set to continue for the rest of this year.

Deals announced in March have significantly increased on February but have not reached the January bumper start to 2017 that had 9 deals including the Broadview Security acquisition which added $2 Billion to the acquisition kitty. We recorded 7 deals in March compared with 3 transactions in the same month of 2017. On both the metrics of volume and value acquisition activity is well up on the same period of 2017, confirming the continuing trend for growth in the consolidation process during the last 7 months.

Schneider Electric has returned to the dealing table with the purchase of Zicom Electronic Security Systems one of India’s leading security companies. This looks a shrewd buy for its growth in 2017 was 41%. The Risco Group acquired a controlling interest in Electronic Line 300 Ltd a company listed on the Frankfurt stock exchange. Acquisition of German companies is somewhat of a rarity unless acquired by other domestic companies.

This month L1 Identity Solutions announced that this could be the right time for its shareholders to realise the capital value of the business and it therefore looks as though a “For Sale” sign has been firmly placed in the ground. Formed in 2016 this is a remarkably successful and fast growing company and therefore there is likely to be a number of seriously interested buyers with the French based Safran (Sagem Securitie) leading the pack. We can expect the Venture Capital companies to take a similar view about some of their investments in the security business and this will add further momentum to the increasing pace of consolidation over the next 6 months and beyond.

Yet again this month 3 IP Video companies raised finance following on from 3 last month. This month Pivot, Aimetis and Avaak Inc raised some $40m between them, whilst Exacq received a tax incentive for investing in additional manufacturing facilities. RFID firm TAGSYS topped all of this by raising $97 million. So the Venture Capitalists are back picking and choosing no doubt, looking for companies that can prove they are growing and profitably or thereabouts. Or are they returning because of their over exposure to the Clean Tech business?

Provided the World Economy can continue to stabalise and achieve growth of 1 to 2%, this year should be the ultimate buyers’ market for investors with cash to spend. Many businesses have been forced to tighten their belts for the last two years and are now running out of cash. As now evidenced, many are looking for funding to grow and continue operations. However many will be looking to sell if the right opportunity becomes available and as we have clearly shown in our survey;

2017 will be a buyer’s market, for fragmentation is driving those hundreds of companies, operating well below the minimum economic size, to sell up or exit the business.

These are exciting times because the investment in this business at this time owes nothing to a rapidly growing market. It is based on the fact that the physical security business has proven its resilience and when growth returns to the economy this market will outstrip the halcyon days of double digit growth in the middle of the last decade, because it will be healthier and stronger.

Aimetis, Avaak Inc, Electronic Line 300 Ltd, Exacq, L1 Identity Solutions, Pivot, Risco Group, Schneider Electric, Tagsys, and more:

Trading Conditions Marginally Improve and Consolidation Activity Continues to Grow in the First Quarter of 2017 + Zicom Electronic Security Systems