Report: Rapid Technology Evolution, M&A Activity Drives Security Integrator Growth
Capstone Partners’ July 2023 Security Solutions Sector Update shows private equity-led acquisitions have buoyed M&As in the security sector.
BOSTON – Private equity-led add-ons, driven by consolidation among systems integrators, has buoyed merger and acquisition activity in the security solutions sector this year, according to investment banking firm Capstone Partners’ July 2023 Security Solutions Sector Update.
Deal volume in the sector “has moderated year-over-year (YOY),” but technology innovations “have created new revenue opportunities to drive growth, supporting a healthy forecast for deal-making through year-end.,” the report says.
M&A activity in the security solutions sector has also shown greater resilience than the broader M&A market, according to Capstone Partners’ findings. Through Q1 2023, sector deal volume declined 19.6% YOY, compared to a 25.2% YOY drop in the broader M&A market, the company says.
Financial buyers in particular have kept M&A volume afloat in the sector, accounting for 57.1% of all transactions through YTD, according to Capstone’s research. Private equity buyers in the sector have opted to acquire businesses almost exclusively through established portfolio companies, the report says.
“While the advent of new Internet of Things (IoT)-connected physical security devices have improved end user accessibility and data collection, the integration of physical and digital security solutions has brought on new cybersecurity challenges,” according to Capstone Partners’ research.
“In turn, security systems integrators have evolved their service offerings to adapt to more complex security environments,” the report says. “Systems integrators operating in the Security Solutions space have previously integrated individual and localized physical security devices.”
More From Capstone’s Security Solutions Sector Update
Since the IoT connects all devices through a common network, integrators “have pivoted their services to address multiple security vulnerabilities at once,” according to the Capstone Partners report. “This has led to more comprehensive security product models for residential and commercial end markets, as companies are now able to market packaged services that include product and integration.”
Packaged services such as Video Surveillance-as-a-Service (VSaaS) and Access Control-as-a-Service (ACaaS) “have benefitted systems integrators through recurring revenue streams and increased sales,” the report says.
“Security remains a bastion of stability and growth amidst this uncertain economic climate. Strategic and financial acquirers recognize the continued opportunity in the space, supporting a solid deal making environment.” says Capstone Managing Director Tom McConnell, the lead contributor in the newly released report.
Also included in Capstone Partners’ latest report:
- A breakdown of public company performance, categorized by end market and segment.
- How strong sentiment from U.S. citizens on elevated crime has benefited investment into the sector.
- Leading companies in the sector that have focused on IoT-connected physical security products.
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