Small independents may benefit from Tyco purchase of Broadview
Tyco International Inc. announced this week its acquisition of Irving, Tex.-based Broadview Security for about US$2 billion, but one Canadian competitor believes the deal will eliminate a major competitor and create more opportunities for smaller security providers.
Naren Gursahaney, president of ADT Worldwide, which is owned by Tyco, said, “As I view it, we’re really acquiring three things: One, a high quality customer base that delivers solid recurring revenue; two, account generation and service engine that adds to our customer base every day; and three, operational and tax synergies.”
The deal will add 1.3 million customers to ADT’s North American small business and residential monitoring portfolio, giving ADT a new combined customer base of more than six million.
“I think Broadview is an excellent strategic fit with ADT’s residential and small business operations in North America. Our product and service offerings are very complementary – this combination should allow us to better serve our customers in this very fragmented and competitive industry,” said Gursahaney.
According to a note from IMS Research, the acquisition of Broadview will give ADT more than 50 per cent of the North American residential alarm monitoring market. But Gursahaney disputed that assessment, saying that ADT/Broadview’s combined market share will be “significantly lower” than 50 per cent. He also said that there is considerable room for growth in the residential monitoring market, with plenty of potential customers who have yet to invest in home security.
The market is currently very fragmented, said Gursahaney, with “thousands of competitors out there. I don’t think that this transaction significantly changes the competitive dynamics in the market.”
One of those competitors, Mike Jagger, president and CEO of Vancouver-based Provident Security, disagrees. The acquisition of one large monitoring company by another shifts the security landscape, providing new opportunities for smaller companies to distinguish themselves.
“There’s now one giant company and alternatives. As long as you’re an alternative that’s distinct, that’s a good thing,” said Jagger, following news of the acquisition.
“Essentially, one entire behemoth is going to be gone. There’s so much opportunity there for small companies that can move quickly and are focused on niche,” he added.
“The real business is on the service side – it’s looking after customers and building relationships with customers. That’s where a company wins or loses. It creates more differentiation.”
Broadview Security went through its own rebranding process last year when it shed the name of its parent company Brink’s. Broadview will have to endure another rebrand as it becomes part of ADT and that is only going to sow further unrest in the customer base, said Jagger.
“It’s going to give a huge chunk of the market a reason to think about who’s providing their service and whether that’s a company they want to stick with. For any independent company, there’s a lot of opportunity in that.”
The ADT/Broadview acquisition is expected to close in the next three to six months. Gursahaney wouldn’t comment on particulars, but said there may be changes to staffing levels as a result of an “aggressive synergy model.”
ADT North America president John Koch added that senior representatives from ADT and Broadview will adopt a best practices approach to the acquisition, taking successful elements from both businesses.
The deal “allows us to broaden our sales, installation and service capabilities,” he said. “We’ll also be able to increase distribution for both our direct and dealer channels,” he said. “We’ll also be able to broaden our geographic coverage. We will be in a position with the combined companies to bring next generation products and services to the market more clearly.”Published January 19, 2010 · SP&T News · Written by Neil Sutton