September 2009 Executive Summary Security Industry Monitor 1 Security Industry Monitor December 2018 For additional information on our Security Team, please contact: John E. Mack III Co-head, Investment Banking Group Head of Mergers and Acquisitions (310) 246-3705 jmack@imperialcapital.com Bill Lynch Managing Director, Investment Banking Group (310) 246-3789 [email protected]Rick Juarez Managing Director, Investment Banking Group (415) 615-4002 [email protected]Koby L. Tanzer, CFA Head of Israel Office Imperial Capital Israel, Ltd. +972 (54) 720 0999 [email protected]PLEASE SEE IMPORTANT DISCLOSURES ON LAST PAGE
Transcript
September 2009
Executive Summary Security Industry Monitor
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Security Industry Monitor December 2018
For additional information on our Security Team, please contact: John E. Mack III Co-head, Investment Banking Group Head of Mergers and Acquisitions (310) 246-3705 [email protected] Bill Lynch Managing Director, Investment Banking Group (310) 246-3789 [email protected] Rick Juarez Managing Director, Investment Banking Group (415) 615-4002 [email protected] Koby L. Tanzer, CFA Head of Israel Office Imperial Capital Israel, Ltd. +972 (54) 720 0999 [email protected]
PLEASE SEE IMPORTANT DISCLOSURES ON LAST PAGE
December 2018
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Security Industry Monitor
Table of Contents
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Table of Contents
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Security Industry Monitor
Table of Contents Section I Executive Summary ...................................................................................... 5
Defining the Security Industry 7
Macroeconomic Overview 9
Equity Performance and Valuation 11
M&A Snapshot 15
Public Debt and Equity Offerings Snapshot 16
Registered Direct and Private Placement Snapshot 16
Bankruptcies Snapshot 17
Security Industry Transactions Outlook 17
Physical Solutions Overview 18
Identity Solutions Overview 18
Information Security Overview 19
Section II Physical Security Sector ............................................................................ 21
Sector Outlook and Commentary 23
M&A Review and Outlook 40
Notable Middle Market Transactions 40
Registered Direct and Private Placement Snapshot 42
Public and Rule 144A Debt and Equity Offering Snapshot 43
Bankruptcies 43
Section III Identity Solutions Sector .......................................................................... 47
Sector Outlook and Commentary 49
M&A Review and Outlook 53
Notable Middle Market Transactions 53
Registered Direct and Private Placement Snapshot 54
Public and Rule 144A Debt and Equity Offering Snapshot 54
Bankruptcies 54
Section IV Information Security Sector ..................................................................... 57
Sector Outlook and Commentary 59
M&A Review and Outlook 66
Notable Middle Market Transactions 66
Registered Direct and Private Placement Snapshot 67
Public and Rule 144A Debt and Equity Offering Snapshot 67
Bankruptcies 67
Section V Unmanned Aerial Systems Sector ............................................................ 71
Sector Outlook and Commentary 73
Notable M&A Transactions 85
Registered Direct and Private Placement Snapshot 85
Bankruptcies 85
Section VI Appendix ................................................................................................... 89
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Why Are a Few of the Independent Monitoring Companies Growing So Fast?
We believe that studying the independent monitoring companies – both the winners and the also-rans –
can provide some intriguing insights into 1) the growth of the small security dealers, which formed the
base of the original group of accounts for the independents, 2) the fast growth of some new “age” IOT
home system providers, 3) the success of some, and lack of success of other, MSO providers in
penetrating the home and commercial premises control business, and 4) the value proposition of lower
monthly costs paid to independent central stations versus the fully integrated security companies such as
ADT Inc., Brinks Home Security, Vivint, Vector, Guardian Protection, and CPI (in Europe and Latin America).
Independent monitoring providers are investing heavily in technology and human resources, trying to
show that they have the capabilities to monitor and analyze virtually anything that can be tied to the
premises, including many critical aspects of a human being’s life where human intervention can help.
Advances in communications between the residential/commercial premises, monitoring centers,
emergency response centers, intelligent and predictive video, and intelligent and predictive access control
and mobile health, and even unmanned aerial vehicles, all radically change the scope of revenues
available to the independent monitoring centers. However, these advances also raise the bar to become
successful. The challenge for the independent centers as they gather and analyze data from all these
sources is the issue of scale: 1) can they keep up with the growth and scale demands of some of their
newer giant MSO and technology clients, 2) can they keep up with the increasing need for cybersecurity
in the premises and between the premises and the monitoring station, and 3) how do they manage
privacy: to whom does the data belong and can the monitoring centers use it?
We believe the most obvious reason for the growth of independent monitoring is the realization by
MSOs, technology giants, and DIY entering the market that their relative lack of emergency call center
operational and service expertise to police, health care, and fire responders puts them at a disadvantage
to more traditional providers who have dealt with responders for decades. As a result, the leading MSOs
in home automation have opted to outsource that part of their monitoring, response, and service, away
from in-house centers and generic customer service representative (CSR) centers to more trusted partners
who have been in the critical monitoring business for years, sometimes decades.
These newer entrants into the home automation industry are in it to control the home, not just to
provide better security. They include:
� Multiple System Operators (MSOs), such as:
� Cable: Comcast, Cox, Spectrum
� Telco: BCE Inc., AT&T (Digital Life)
� Tech/Internet: Google (Nest), Amazon (Alexa, Ring), Samsung (SmartThings)
� DIY: Simplisafe, Arlo Technologies, Ooma Inc., Protect America, Frontpoint
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Lack of Expertise in Monitoring and Service Has Driven New Market Entrants to the Independent Monitoring Companies
This lack of expertise by new entrants has some key touchpoints: We note that AT&T launched its Digital
Life security business in 2013, with its own monitoring and customer service centers. The company had
some effective commercials during the 2016 Olympics, and as of the end of 2016 was available in 84 U.S.
markets. However, we have not seen any marketing or any new products from Digital Life since August
2017. We wonder if AT&T will finally sell the business or return to it using one of the independent
monitoring and service companies. We have not been able to learn about either option.
Verizon also launched a security business in 2011: DIY kits ordered online and sent to the home (similar to
Protect America, the original and largest monitored DIY company). However, Verizon abandoned the
business two years later. A report by Reuters in 2013 noted service problems and lack of DIY experience
on the internet were the reasons for the business failure. The company has yet to come back to the
market. We assume it will return at some point, and we would once again ask how it will handle its
monitoring, dispatch, and customer service.
The more successful “traditional” DIY companies such as Protect America, Frontpoint, LiveWatch (now part
of Brinks Home Security), and lately, Simplisafe, offer monitoring, and they are all handled by the leading
independent monitoring companies, with the exception of LiveWatch.
As noted above, the independent monitoring industry is in major flux – with higher growth rates than
electronic security overall – but those higher growth rates are centered on a few leaders at the top. As
these higher growth companies realized early on (within five to eight years ago), they have to focus on a
high level of investment in redundant infrastructure, technology-savvy software writers (APIs are
becoming critical to broaden and make easier the integration of add-ons after the initial installation), and
investments in new customer-centric analytic services and technologies in order to be a leading company.
Independent Monitoring Must Compete for Technology Talent
The dramatic improvement in the last two years in analytics (leading to associated technologies of deep
machine learning, predictive analytics, and artificial intelligence) has created a need to hire as many (or
more) software professionals in premises monitoring companies as customer service representatives and
administrative personnel. Keeping talented employees requires the ability to pay them competitive rates
and to invest in a working environment that is conducive to younger employees, while promoting a high
degree of success from writing code to servicing customers. For those few with the capital and the
management who understand these needs in “the old” security industry, this creates an advantage against
smaller independent central stations that do not have the capital to invest. It also creates an advantage
against smaller-to-medium sized integrated security companies that must also divide their investment
between marketing and acquiring individual clients against investing in the monitoring and emergency
services communication infrastructure. At the same time, internal efficiencies and high skill in choosing
the most productive personnel for monitoring, customer service, software development, and
infrastructure development can eventually produce a lower cost to serve clients, driving up not just
margins, but also providing the ability to price services at a lower cost for competitive purposes.
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A Critical Intersection for the Industry: Verification Technology and the ASAP-to-PSAP Protocol. Will the Independents Need to Adopt to Satisfy False Alarm Issue?
Technology leadership and efficiency leadership lead us to one more reason the leading independent
monitoring companies are getting so much new business now: the issue of verification, false alarm, and
the value proposition of having the fastest law enforcement/healthcare/fire response when an event
occurs. This is about to go from being an issue that is a topic of conversation to one that could be
essential to a premise automation company’s value proposition. According to an Urban Institute study
conducted in 2014, 90-99% of the alarms police respond to are false. Police response has slowed
dramatically, unless human or machine verification proves there is a valid reason, and communities have
instituted fines (some very onerous) for repeat false alarm offenders. This is one reason why the traditional
residential security industry penetration remained stuck at about 20% of residences for nearly a decade
(see our December 2017 Premises Control and Automation: Outlook for 2017-2024 white paper). However,
IHS Markit now believes that these new entrants into the home automation industry are the catalyst for
about 49-50% annual growth in cloud-based smart home devices. A survey of five leading market
consulting firms shows a mean growth rate of “connected homes” ranging from 14.5% to nearly 30% over
the next five years. In conclusion, if police are overwhelmed by responding to alarms on 20-21 million
homes that are false today, they are almost certain not to respond to signals on 30 million homes in
several years, unless there is a trusted verification protocol put in place.
Therefore, we are highly focused on investigating which of the independent monitoring companies have
joined, or are preparing to the join, the ASAP-to-PSAP program being instituted by cooperating industry,
community and responders organizations. That is, in full, “The Automated Secure Alarm Protocol-to-Pubic
Safety Access Point” program. The ASAP program is a computer-aided dispatch system, which over the
last 15 years has been integrated into a nationally connected network to centers with 911 operators. By
using verified signals, and eliminating most human interface, false alarms have been dramatically reduced
in every city that has adopted the program.
One of the most important developments in the security industry is the rise of automated signaling from
verified (video and audio) sensors, which allow software at the monitoring center to alert the 911 system
with a very low incidence of false alarms, little or no human interaction, and a dramatic increase in speed
over formerly phone-to-phone human interaction (ASAP-to-PSAP, see the discussion in the next section).
As the number of smart homes sending out signals from various types of sensors surges, the false alarm
issue of police response, community fines, and a worsening value proposition will create a giant gap
between the haves and the have not’s in the home automation industry. However, this industry-critical
technology cannot be employed without investment in wireless technology and upgrades of most central
monitoring center software. Traditional POTS (plain old telephone service) lines systems, and most
remaining 2G and even many 3G wireless systems, will have to be upgraded to 4G in order to process the
signals for ASAP-to-PSAP. Not all the major independent monitoring companies have signed on to this
program yet, which is active in nearly 40 cities, with another 40 in process. See further commentary in our
discussion of Emergency Monitoring Technology.
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Personal Emergency Response Is an Important – and Growing – Service Offering
Yet another reason for the continued market gains of the independent monitoring companies is the
potential seen in the industry for the aggressive and combined growth of traditional personal emergency
response systems (PERS), with advanced PERS and with mobile wireless health care monitoring. According
to the U.S. Census Bureau, between 2016 and 2030, the number of people aged 70 to 84 will increase by
17.5 million to a total of 42 million, or about 4% annually. For about a decade, a relatively large number of
dedicated PERS monitoring companies have focused solely on marketing to aging end users and their
families. In addition, a small group of PERS companies marketed to the health care institutions and health
care payers instead.
However, technology and smaller form factors (i.e., the Apple Watch and mobile health care watches from
Johnson Controls, Stanley Security, etc.) have continued to improve and point toward more passive
monitoring of bodily functions and location services that cover a much larger area with greater accuracy.
PERS companies trying to make the switch to these new technologies depend on independent monitoring
companies more than ever for help. We believe that regardless of whether the dedicated PERS providers
succeed, or new wearable health care technology companies also succeed, they are all going to need
monitoring capability that results in the correct response. That response can be a quick dispatch, or it
could mean a healthcare specialist at the monitoring center staying and consulting on the phone with the
end user for 30 minutes. Much larger and more accurate location leading central monitoring stations
require dedicated and certified personnel to handle these special calls and consultations.
Finally, cloud-based monitoring solutions in video and access control provide a long list of improvements
not just in security, but in human resources, building management, and in the company’s business
processes. These services can also be adapted for residential use. However, monitoring cloud-based
services requires significant training, which will put further pressure on small integrated and independent
monitoring centers to seek outside help, most likely from the leading independent providers.
The Leading Independent Monitoring Companies
Unless they are divisions of larger companies, all the “wholesale” monitoring companies are currently
privately owned, many with private equity investment, some still owned by families. Given the private
nature of these companies, what could be termed intense competition at the top, and the lack of reliable
statistics, we have had to ask management teams, competitors, and customers for as much information as
possible. Based on these conversations, we have come up with a short list of leading independent
monitoring companies in North America. Specifically, we have met with senior and operating
management teams at the headquarters of COPS Monitoring, Rapid Response Monitoring, and Affiliated
Monitoring.
� COPS Security, based in Williamstown, New Jersey, with seven central stations, 3,500 dealer
clients, representing some 2.8 million customers, is the largest independent monitoring company.
Apart from its small and medium alarm dealers, the company also has significant MSO and DIY
clients. On its web site, the company notes that its goal is to respond to incoming calls within 20
seconds, and that for the last month, it has averaged 16.5 seconds.
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� Criticom Monitoring Services, based in Manasquan, New Jersey, three central stations, including
Florida and California. (formerly a division of Protection 1, and now, ADT), and 800,000 end
customers.
� Rapid Response Monitoring Services, based in Syracuse, New York, two central stations. As of
2017, 1,700 dealer clients representing some 1.4 million subscribers (and the winner of the
Monitoring Association’s 2016 Central Station of the Year). In 2017, Rapid Response increased its
UL capacity from 40,000 square feet to 75,000 square feet in its two central stations, one in
Syracuse, and a redundant facility in Corona, California. A third facility in Syracuse is tied into
Corona but is not yet fully redundant. The company has about 40 integrations in the ASAP-to-
PSAP program.
� EMERgency24, based in Des Plains, Illinois. One of the oldest independents, founded in 1967, the
company has a full range of monitoring services, was the first to set up a redundant facility and
the first to synchronize alarm signals with video. EMERgency24, is regarded as a leader in video
verification and VSaaS services, partnering with Videofied (bought by Honeywell in 2016).
� Affiliated Monitoring, based in Union, New Jersey, two central stations, founded in 1982. Winner
of 2018, “Monitoring Center of the Year,” from The Monitoring Association. Affiliated was an early
leader in moving PERS into the digital world.
� Acadian Monitoring, based in Lafayette Louisiana, three central stations, including Baton Rouge,
Louisiana, and Chicago, Illinois.
As we previously mentioned, we recently met with the management teams at COPS Monitoring, Rapid
Response Monitoring, and Affiliated Monitoring. All of the companies are full service, meaning they work
with multiple signals, provide multiple service technologies for their clients, and provide multiple
consulting and training services to their dealer clients. The senior managements of all three companies are
well-known throughout the premises control industry, although we do not believe the operating
managements underneath the C-level are as appreciated as they should be by outsiders. To manage
through disruptive technological and client change, and to deliver a value proposition under heavy
demands from key clients is hard enough. Changing protocols to move ahead in a world where situational
verification will determine the quality of response and brand reputation requires a highly trained staff that
is always vulnerable to offers from other technology companies. These are common to all of the
companies we visited.
We found differences in the way these companies approached training and promoted human talent,
differences in how they viewed charging customers, particularly large new entrants, and differences in
how much infrastructure/technology investment was needed to maintain the double-digit growth they are
all facing.
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COPS Monitoring
We believe COPS is the largest independent monitoring company, with the most clients and the most
central stations, and one of the best cost structures in the industry. COPS views what is going on now in
the changing nature of the “security” industry as a small part of a much larger war for control of the
home. “It just happens that monitoring is the spear tip that these major companies are using to fight for
control of the home,” notes Ira Riklis, CEO of COPS.
COPS has extensive experience with signaling from its nearly 4,000 clients, and it is able to monitor the
cost of each signal, and can provide prices based on signals.
What we believe may set COPS apart from other monitoring providers is its acceptance of the human
element in developing products and services for its clients, at a good price. The company’s employees
have been encouraged to suggest services based on their interactions with dealer customers. Additionally,
as COPS client base has changed, so too have the ideas for new services generated by the customer-
facing employees.
COPS is focused on making sure its employees are engaged. The hiring process is intense, and like its
competitors, less than 10% of applicants are hired. It takes six months to move up through the education
process to where an employee is fully operational. Employees must continue to be up to a certain level, or
they will not be retained, even though the hiring process is intense. As the employees move up, they are
evaluated for those specialty service areas in which they are most competent, but it is clear that if they
make it through the process, the investment that the company makes in its employees has led to a
sensitivity to specific client needs that have brought COPS some of the largest MSOs as well as DIY
partners.
Rapid Response
Many observers of the independent monitoring industry likely know that Rapid Response has invested
very heavily in infrastructure and technology, far and away above UL and other standards necessary for
certain high-end customer certifications. However, what struck us most about Rapid Response was the
almost militarily tough and precise means by which it hired and promoted new employees, while
following up with a highly employee-directed office and worker ambience (at least for those who work at
the Syracuse facility). With a fairly deep well of students graduating from schools such as Syracuse
University and Rochester Institute of Technology, the company has an advantage in hiring technology-
oriented workers one would not normally expect in its area. The hiring process at Rapid Response is
intense, and highly selective, with single-digit percentages making it through the hiring process.
Rapid Response has been in the health care industry for a long time. For example, in 2009, Rapid
Response launched the LifeSafety Monitoring Division to serve those who wanted to maintain their
independence, knowing they are protected by a dedicated organization, with advanced monitoring
technologies, including GPS and fall-detection, as well as specialists (most EMD/EMT certified) who are
chosen for their exceptional customer service and comforting manner.
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Without going into the long list of technology and infrastructure investments Rapid Response has made
in the last five years, we think it is fair to state that the company far exceeds all licensing requirements to
be at the top tier of the industry, and far exceeds the capability demands that even the largest potential
clients could ever need to add a professionally monitored option to their existing business, whether it is
legacy, MSO, or DIY in nature. The data and power rooms are a showcase for a company of its size. We
would estimate some substantial double-digit millions of investment at Rapid Response, which is a lot per
current customer. The Syracuse facility includes four digitally controlled Caterpillar diesel generators. Two
of them supply 1.2 megawatts of standby power, and they are backed up by separate, independent 1,200-
gallon fuel tanks. An additional two generators provide supplemental 1.6 megawatts of secure standby
power using independent 3,100-gallon fuel tanks. Additionally, four blue hued “Liebert” 150kVA
Uninterrupted Power Supply units, all in the same place, are wired to provide power whenever the street
power goes off. It appears that Rapid Response is either preparing for a lot of new business, or its
executives have decided to invest for the next 5-10 years right now.
Affiliated Monitoring
Affiliated Monitoring has also changed with its client base, leaning toward a much more technological
orientation. The company, like other leaders in the industry, uses relatively modern NIST Special
Publication audits. The company, in its presentations to prospective and existing clients, shows exactly
where in the technology stack it operates (the various structures of different components/services that
make up a software solution). The company navigates the deep, but competitive technology personnel
pool available in the New York metropolitan area. Only about 2% of applicants are hired. As a result of the
deep pool, the company has been able to take leading, but standard, monitoring operations software and
constantly customize it to fit response and customer care demands as its client base shifts toward more
sophisticated users. About a quarter of the signals the company takes in are analyzed by software
developed through its API program, an important arm of business development and customer service.
The API program has helped Affiliated Monitoring to not only better integrate security services (PERS,
video, crash, etc.), but has helped it in its workforce management, forecasting future client needs and
flexing the hiring and ongoing education process to accommodate the needs of new customers who are
not even yet on board.
The company’s redundant facility is in Houston, and redundancy is checked twice a month, and a full
redundancy check is done four times a year.
A significant percentage of Affiliated’s RMR comes from health care and personal emergency monitoring.
It sponsors “Catalyst” (one of the largest PERS conferences), and has created application developer
interfaces (API’s) for a large group of health care integrations, using the area expertise from a deep
number of drug and health care companies in the New York/New Jersey metropolitan area. For example,
in 2017, Affiliated unveiled the first of a series of new software releases, “CareAlert: Priority Group Chat,”
to enhance communication in an emergency among the protected person’s circle of family and friends.
When a PERS user sends an alert and a care specialist begins making calls, CareAlert sends a text message
to the user’s loved ones and caregivers simultaneously. Those people simply click on a link contained in
the text and it opens up a group chat feature so they can decide on the best way to help their loved one.
By clicking on an “on my way” button, one person can let everyone in the group know that they are going
to check on the PERS user. CareAlert is supposed to be phone agnostic and will adapt to every PERS
provider on a private label basis for those dealers partnering with Affiliated.
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Affiliated, similar to other leading monitoring companies, integrates with the leading video verification
platforms, including I-View-Now, SureView’s “Immix,” as well as Alarm.com. The company’s dealer
partners have a range of end user customers including Quick-Service national accounts, auto dealerships,
financial services, trucking and heavy equipment yards, government facilities, as well as big box retailers.
The company has also developed a consultative approach to its partner relationships, with a dedicated
team in analytics technology, in that its dealer partners will frequently bring it into meetings with end
users, including “stand-up” meetings. The company provides a host of mobile and web tools on its dealer
portal, including API’s, messaging applications, wide range of customer “success” apps, and a wide range
of IoT/device integration help from mobile PERS to advanced geofencing.
Reducing False Alarms and Speeding Up Response Through Automated Signaling. Now What Do We Do with Verification?
Ever since the development of the digital dialer in the 1990s, the number of security installations has
grown from commercial and “carriage trade” residences, to a mass market encompassing over 20% of
homes in the U.S. Unfortunately, along with that growth has come a coincident growth in the number of
false alarms that has stretched budgets and time management for both law enforcement and health care
operators. Whether the high rate of false alarms is due to user errors (most common), or poor alarm-
validation procedures, or equipment failure, what is certain is that police and community relations work
done by small and large monitoring companies to explain how to better deal with false alarms, has not
stopped an increasing number of cities from instituting sanctions that penalize the end user and/or the
monitoring company for false alarms. The monitoring industry’s value proposition is thus under pressure
from those that believe that the industry either does not care about, or is incompetent in significantly
reducing false alarms. This is before considering what will happen with the new surge in technology, MSO,
and DIY company entrants, all adding devices to the home and small business, which we believe will
greatly increase the number of available monitored (and unmonitored) systems.
However, without real improvements in both verification and notification technologies, we can see the
response time and municipal fine problem getting worse as the industry braces for another spurt in
growth from these newer MSO, big technology, and DIY entrants. Some of these users, particularly
younger and newer entrants, will initially bypass monitoring altogether, preferring to deal directly with the
911 network, further complicating an already confusing situation. How large could this problem become?
Growing penetration rates will likely make the false alarm problem worse. Based on our research, we
continue to see a rapidly expanding market for premises automation, including Internet of Things services,
for both residential and commercial applications. With a growing number of companies and new devices
entering the category, technology and end-user satisfaction will increasingly define this market and
enable the more than 12,000 independent security dealers in the U.S. to participate in the smart home
and business opportunity at some level.
As such, we estimate the total available U.S. market for fee-based security systems/devices at nearly 50 million
homes by year-end 2024, compared with an estimated 22.7 million homes in 2017. We estimate the revenue
potential to reach $62 billion by year-end 2024, compared with an estimated $26 billion by year-end 2017.
Ultimately, we estimate that the penetration rate for total fee-based security systems (both integrated security
and DIY solutions) was 22.7% in 2017 and could increase to 29.6% by 2020 and then to 42.0% by 2024. See our
December 2017 Premises Control and Automation: Outlook for 2017-2024 white paper.
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The revenue potential for the U.S. market for fee-based security systems/devices could vary materially,
depending on how many newly developed apps are being sold. We continue to believe the market is
large enough to allow a multitude of home solution providers to successfully compete: from the highly
customizable home solutions provided by Crestron, Savant, and Control4, to ADT Corp., Vivint, and
Verisure, as well as select DIY products that have a strong reputation and brand following, such as Ring
Wi-Fi Enabled Video Doorbell. However, we believe this will be of little help to end users who still want
quick response and a sense of safety in addition to having the ability to adjust home controls, if growing
false alarms put a damper on response timing, while increasing fines for each false alarm.
However, there are already consequences to an accelerating penetration of homes presently. More and
more communities and police departments are beginning to “score” response to calls for help based on
who they trusted in the past, whether there is a verification of the threat, and how complicated the threat
is to interpret by the 911 operators. We wonder how much of the estimated market growth will be at risk
if each of the new 25 million homes we estimate being added by 2024 adds even just one false alarm per
year. (The current average according to The Monitoring Association [TMA] is 1.7 per year.) All one has to
do is search for “false alarm ordinances” on the internet to see the scores of cities that have tried and will
continue to try to limit quick response to unverified alarms, and to financially punish those who are
blamed for poor alarm history.
Some sobering results came out of our survey report dated June 12, 2018 on 500 police and health care
responders. The conclusions of the survey were that police were far more likely to provide an earlier
response (nearly 5x more likely) to a verified call from a professionally monitored system than from a
verified call from a DIY caller. Health care responders were more than 5x more likely to respond first to a
professionally monitored call than from a DIY initiated call. However, when the call was not verified, the
likelihood of response became much closer; Survey comments indicated that once a call was flagged as
unverified, the focus for quick response faded, regardless of the source of the call.
Based on the above, we can only conclude that time is running short for the entire alarm and home
automation industry from professional monitoring companies to simple phone-based DIY systems to
provide verifiable, understandable, and accurate “actionable” data to responder organizations in order to
protect all their value propositions, ranging from safety and security to simple conveniences of the
connected home.
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Solutions in the Works
The good news is that cities tend to respond to verified and trusted sources of dispatch signals.
Fortunately, there is not a lack of initiative and long-developing programs and technologies to help
monitoring companies to increase or regain the trust of communities and responder organizations with
regard to reducing false alarms, and improving data accuracy.
In our opinion, a great example is Sonitrol Inc. (purchased by Stanley Black & Decker in 2008). Sonitrol has
been in business for 55 years, with a proprietary audio incident verification solution, and can document 7-
8 minutes average police response (6-7x faster than residential unverified) which claims and advertises
179,000 apprehensions as a result of quick response to its dispatch calls. Sonitrol is sold mainly to
educational and commercial enterprises, and is relatively expensive – probably too expensive for the mass
and DIY market today. Even so, Sonitrol continues to grow. However, the company uses proprietary
software and is not integrated well with other systems in the alarm monitoring center (it is run as a
separate monitoring area inside the monitoring center), but we cite Sonitrol as an example because its
solutions offer some proof that police will respond quickly to trusted, verified sources.
Other companies with sophisticated monitoring and responder communications capabilities for
enterprises, such as ADT Inc., Securitas Electronic Security, Interface Security, Johnson Controls, Stanley
Black & Decker, AlliedUniversal, and G4S have expensive analytics and machine learning capabilities in
video and access control – and internal or contracted security professionals (guards) to verify that an
incident demands a professional response.
There are increasingly strong new entrants in the verification business that have the technology to
address the problem for verification.
The first example is I-View Now, which is increasingly utilized by the security industry’s leading providers
for video and signaling solutions. I-View Now integrates security system signals, video sources, cloud
applications, and internet-connected devices into a cloud platform with the objective of giving end users,
operators, and authorized emergency responders better information to prioritize their resources. Their
cloud architecture and Software as a Service (SaaS) model means there is no additional software or
hardware to purchase at the edge, in the monitoring center, or for the emergency responders. Unifying
these technologies and constituencies results in fewer false alarms and faster response times.
Another strong participant is SureView Systems. SureView owns, develops, sells, and supports the Immix
product line. Immix is a video centric software platform designed to receive alarm events from video,
video analytics, access control, automation platforms, and situational awareness systems.
And then there is Alarm.com (ALRM), the leading platform for the intelligently connected property, a
Security Industry Monitor Physical Security Sector
41
� Nortek Security & Control, LLC acquired IntelliVision Corp. for an undisclosed amount
On May 9, 2018, Nortek Security & Control, LLC acquired IntelliVision Corp., a provider of video analytics,
video content analysis, and automated surveillance solutions.
� Canon Inc. acquired BriefCam Ltd. for an undisclosed amount
On May 9, 2018, Canon Inc. acquired BriefCam Ltd., a provider of systems for reviewing analyzing, and
indexing of surveillance camera content.
� The Brink’s Company acquired Dunbar Armored, Inc. for $519.8 million
On May 31, 2018, The Brink’s Company acquired Dunbar Armored, Inc., a provider of cash management,
logistics, and loss prevention solutions worldwide.
� Allied Universal acquired U.S. Security Associates, Inc. for $1 billion
On July 16, 2018, Allied Universal acquired U.S. Security Associates, Inc., a provider of uniformed security
services.
� Best Buy Co., Inc. acquired GreatCall, Inc. for $800 million
On August 15, 2018, Best Buy Co., Inc. acquired GreatCall, Inc., a provider of a personal emergency
response system.
� Hellman & Friedman LLC acquired SimpliSafe, Inc. for an undisclosed amount
On August 15, 2018, Hellman & Friedman LLC acquired SimpliSafe, Inc., a provider of wireless security
alarm systems, cameras, and monitoring services.
� Amazon.com, Inc. acquired Ring, Inc. for $993 million
On February 27, 2018, Amazon.com, Inc. acquired Ring, Inc., a manufacturer of video doorbells for homes.
� Prosegur Compañía de Seguridad, S.A. acquired G4S Cash Solutions Colombia Ltda for an
undisclosed amount
On June 4, 2018, Prosegur Compañía de Seguridad, S.A. acquired G4S Cash Solutions Colombia Ltda, a
provider of surveillance and private security systems.
� ADT, Inc. acquired Red Hawk Fire & Security, LLC for $318 million
On October 25, 2018, ADT, Inc. acquired Red Hawk Fire & Security, LLC, a provider of life safety and
security systems.
Physical Security Sector Security Industry Monitor
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42
� UTC Climate, Controls & Security acquired S2 Security Corporation for an undisclosed amount
On September 20, 2018, UTC Climate, Controls & Security acquired S2 Security Corporation, a
manufacturer of physical security and video management systems.
� Securitas Electronic Security, Inc. acquired Kratos Public Safety & Security Solutions, Inc. for $69
million
On February 28, 2018, Securitas Electronic Security, Inc. acquired Kratos Public Safety & Security Solutions,
Inc., a provider of national security services.
� Garda World Security Corporation acquired United American Security, LLC. for $72 million
On March 9, 2018, Garda World Security Corporation acquired United American Security, LLC, a provider
of security guards and guard services.
� BCE, Inc. acquired AlarmForce Industries, Inc. for $72 million
On January 5, 2018, BCE, Inc. acquired AlarmForce Industries, Inc., an integrated security alarm company.
Registered Direct and Private Placement Snapshot
The Physical Security sector experienced a significant increase in private placements during the first three
quarters of 2018 compared to the first three quarters of 2017.
� Owl Cameras, Inc. received $28.5 million in a Series A round
On February 2, 2018, Owl Cameras, Inc., which develops and manufactures security cameras for cars,
raised $28.5 million in a Series A round led by Defy Partners.
� Airspace Systems, Inc. received $20 million in a Series A round
On March 3, 2018, Airspace Systems Inc., a provider of drone security solutions raised $20 million in a
Series A round led by Shasta Ventures and Granite Hill Capital Partners.
� Openpath, Inc. received $7 million in a Seed round
On May 22, 2018, Openpath Inc., which offers security solutions for the office received $7 million in a Seed
round that included participation from Upfront Ventures, Pritzker Group Venture Capital, Fika Ventures,
Sorenson Ventures, and Rincon Venture Partners.
December 2018
Security Industry Monitor Physical Security Sector
43
Public and Rule 144A Debt and Equity Offering Snapshot
Public offerings in the Physical Security sector in the first three quarters of 2018 were in line with the first
three quarters of 2017.
� Assa Abloy raised $58.7 million of debt
On April 19, 2018, Assa Abloy raised $58.7 million in Senior Bonds. The company provides door opening
solutions.
� SPS Holdings, Inc. raised $117 million of debt
On June 26, 2018, SPS Holdings, Inc. raised $117 million on debt. The company provides security
installation, monitoring, and related services.
� Fortune Brands Home & Security, Inc. raised $600 million of debt
On September 19, 2018, Fortune Brands Home & Security, Inc. raised $600 million of senior unsecured
notes. The company is a provider of home security products.
Bankruptcies
There were more Physical Security Solutions bankruptcies that occurred in the first three months of 2018
than the same period the year prior. � Initial Protective Services, Inc. filed for bankruptcy in 1Q18
On January 3, 2018, Initial Protective Services, Inc. filed a voluntary petition for reorganization under
Chapter 11 in the US Bankruptcy Court for the District of New Jersey. Initial Protective Services, Inc.
operates as a security agency providing security and protection services.
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Notable Transactions
Figure 15: Select M&A Transactions in the Physical Security Sector, 3Q16 Through 3Q18
Announced / Filing
DateClosed Date Target Business Description Buyer
Target Implied TEV
($mm)
TEV / Revenue
TEV / EBITDA
9/22/2016 10/26/2016 Neo S Netw orks Neo S Netw orks of fers security and guard services. SK Telink Co., Ltd. $7,213.9 0.8x NA
10/1/2016 11/4/2016 Point Grey Research Inc.Point Grey Research Inc. designs and manufactures digital cameras for industrial, medical and life science, traff ic, biometric, GIS, and people counting applications.
FLIR Integrated Imaging Solutions, Inc.
$252.5 NA NA
10/3/2016 10/3/2016 FJC Security Services, Inc.FJC Security Services, Inc. provides security services to private and public sector clients in the United States.
Allied Universal NA NA NA
12/2/2016 12/2/2016 Hashmira Company LimitedHashmira Company Limited, through its subsidiaries, provides security and guarding services in Israel.
First Israel Mezzanine Investors Ltd.
$111.8 NA NA
12/21/2016 2/22/2017Stanley Black & Decker, Inc., Certain Mechanical Security
Businesses
As of February 22, 2017, Certain Mechanical Security Businesses of Stanley Black & Decker, Inc. w as acquired by dormakaba Holding AG.
dormakaba Holding AG $725.0 NA NA
12/21/2016 12/21/2016
Meggitt Defence Systems Limited and Meggitt Holdings
Canada Inc. (nka:QinetiQ Target Systems Limited)
QinetiQ Target Systems Limited represents the combined operations of Meggitt Defence Systems Limited and Meggitt Holdings Canada Inc. in their sale to QinetiQ Group Plc.
QinetiQ Group plc $71.0 2.2x 11.7x
12/28/2016 12/28/2016 G4S Utility Services
G4S Utility Services represents the combined operations of G4S Utility and Outsourcing Services (UK) Limited, G4S Assessment Services (UK) Limited, and G4S Locks & Alarms (UK) Limited in their sale to FRC Founders Corporation.
First Reserve Corporation
$63.6 NA NA
12/29/2016 12/29/2016 Innotech Security, Inc. Innotech Security, Inc. designs, manufactures, and sells security products.Costar Video Systems,
LLC$15.5 1.9x NA
1/9/2017 1/9/2017 FluxData, Inc.FluxData, Inc. develops and manufactures multispectral and polarimetric imaging systems for aerospace, defense, industrial, medical, and scientif ic markets.
Halma plc $27.5 5.3x NA
1/27/2017 1/27/2017 Cobelguard NV Cobelguard NV provides security services. Loomis AB (publ) $18.2 1.4x NA
2/7/2017 2/7/2017 Rauland-Borg CorporationRauland-Borg Corporation designs, manufactures, sells, and services communication and life-safety equipment for education and healthcare industries.
AMETEK, Inc. $370.0 2.3x NA
2/28/2017 2/28/2017 Package Concierge, Inc.Package Concierge, Inc. manufactures electronic locker systems in the United States.
Gibraltar Industries, Inc. $20.0 NA NA
4/7/2017 5/31/2017 Cassidian SAS Cassidian SAS develops and manufactures security solutions and systems.Airbus Defence and
Space GmbH$14.8 NA NA
6/5/2017 9/1/2017
10% of Westcon Emerging Markets Group (Pty) Ltd and
10% of Westcon Group European Holdings, Limited
As of September 1, 2017, 10% of Westcon Emerging Markets Group (Pty) Ltd and 10% of Westcon Group European Holdings, Limited w as acquired by SYNNEX Corporation.
SYNNEX Corporation $30.0 NA NA
6/14/2017 6/20/2017AlarmForce Industries Inc., US
Subscription Base
As of June 20, 2017, US Subscription Base of AlarmForce Industries Inc. w as acquired by Select Security, Inc. US Subscription Base of AlarmForce Industries Inc. comprises security alarm and personal emergency response monitoring business operations.
Kourt Security Partners, LLC
$11.6 NA NA
9/6/2017 9/6/2017 ipDatatel, LLCipDatatel, LLC designs and engineers innovative cellular and Internet alarm communication devices for the security and home automation industries.
Resolution Products - NA NA
9/18/2017 9/18/2017Integrated Security System
division of SDI Presence LLC
SDI Presence LLC, an information technology (IT) and security systems integrator, develops, installs, and manages technologies for large organizations and government agencies.
Convergint Technologies - NA NA
December 2018
Security Industry Monitor Physical Security Sector
45
Sources: Capital IQ and Imperial Capital, LLC.
Announced / Filing
DateClosed Date Target Business Description Buyer
Target Implied TEV
($mm)
TEV / Revenue
TEV / EBITDA
9/20/2017 9/20/2017 Mercury SecurityMercury Security is a leading OEM supplier of controllers for physical access control.
HID Global - NA NA
7/31/2017 7/31/2017 Protec, Inc.Protec, Inc. provides commercial and institutional electronic security, f ire, and video system.
The ADT Security Corporation
NA NA NA
9/1/2017 9/1/2017Nelco Limited, ISSS and VSAT
business
Nelco Limited, ISSS and VSAT business comprises security and surveillance solutions business and hardw are business and netw ork management services.
Nelco Netw ork Products Ltd.
$4.1 NA NA
11/6/2017 1/5/2018 AlarmForce Industries Inc.
AlarmForce Industries Inc., an integrated security alarm company, provides security alarm monitoring, personal emergency response monitoring, video surveillance, and related services to subscribers in Canada and the United States.
BCE Inc. $143.4 3.2x 12.0x
12/20/2017 12/20/2017 Butterfleye, Inc.Butterfleye, Inc. designs and develops cameras and monitoring systems used for home and off ice security.
Ooma, Inc. NA NA NA
1/16/2018 1/16/2018Diversif ied Protection
Systems, Inc. and ATCi Communications, Inc.
Diversif ied Protection Systems, Inc. designs, constructs, and maintains f ire, air, and electrical systems for critical facilities, production controls, and high asset value areas.
Red Haw k Fire & Security, LLC
NA NA NA
1/22/2018 1/22/2018 Byggsikkerhet AS
Byggsikkerhet AS distributes security systems and solutions including f ire alarms, anti-theft alarms, television surveillance, f ire doors, and safety markings in addition to f ire control, electrical control and el thermography in residential, commercial, and agricultural areas.
Låssenteret AS NA NA NA
2/26/2018 2/26/2018 Chamberlain SecurityChamberlain Security manufactures security components to protect the contents of safes, f iling cabinets, and ATMs.
Rankin Industries Inc.; Broco, Inc
NA NA NA
4/9/2018 5/31/2018Unmanned Security Business of SG Safety Solutions Co.,
Ltd.
Unmanned Security Business of SG Safety Solutions Co., Ltd. comprises a business that provides unmanned security dispatch services and security consulting services.
Netw atch Group provides remote CCTV security camera monitoring services. The Riverside Company NA NA NA
5/9/2018 5/9/2018 IntelliVision Corp.IntelliVision Corp. develops and sells intelligent video analytics, video content analysis, and automated surveillance solutions.
Nortek Security & Control, LLC
NA NA NA
7/16/2018 10/26/2018 U.S. Security Associates, Inc.U.S. Security Associates, Inc. provides uniformed security services, consulting and investigations, and specialized security solutions in the United States and internationally.
Allied Universal $1,000.0 NA 10.5x
7/19/2018 7/19/2018 Systems By Design, Inc.Systems By Design, Inc. manufactures home security solutions that include home burglar, business burglar, and fire alarms.
ADS Security, L.P. NA NA NA
8/2/2018 8/2/2018Access Control Technologies,
Inc.
Access Control Technologies, Inc. distributes security and access control systems for customers in New York, New Jersey, Connecticut, Delaw are, and Eastern Pennsylvania.
Convergint Technologies LLC
NA NA NA
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Section III
Identity Solutions Sector
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Identity Solutions Sector
Sector Outlook and Commentary
Within the identity solutions security sector, we highlight a range of counterfeiting and grey market
scams. We bring attention to the products and services that will be required to authenticate and show
provenance for areas with newly legalized cannabis use. Making sure medical marijuana being sold is
what it says it is and is grown where it says it is grown will likely be a key challenge as the industry growth
accelerates.
Counterfeiting Losses Continue to Grow Worldwide: Counterfeiting Report
On May 15, 2018, the Global Brand Counterfeiting Report, published by market consultant, R Strategic
Global, noted that the amount of total counterfeiting globally reached $1.2 trillion in 2017 and is
predicted to reach $1.82 trillion by the year 2020 (CAGR of 15%), which includes “counterfeiting of all
equipment/products from defense equipment to counterfeiting of watches.” The estimated losses due to
counterfeiting of high end consumer goods amounted to $98 billion, which includes counterfeiting from
offline as well as online mediums.
According to the analysis made in the report, losses incurred by Luxury Brands because of sale of
counterfeiting through internet accounted to $30.3 billion.
The report adds that it estimates that the losses suffered due to online counterfeiting globally amounted
to $323 billion in the year 2017.
Historic New York City Counterfeit Bust: Wide Range of Goods Worth $450 million
On September 17, 2018, WABC News reported nearly two dozen people were arrested in what authorities
are calling one of the largest counterfeit goods takedown in New York City's history, worth about $450
million.
Agents from Homeland Security Investigations and the NYPD shut down an alleged luxury counterfeit goods
operation with 22 suspects accused of illegally bringing Chinese-manufactured goods worth millions of
dollars into the United States by smuggling them through ports of entry on the East and West coasts.
The counterfeit goods included items such as fake Louis Vuitton and Tory Burch handbags, Michael Kors
wallets, Hermès belts and Chanel perfume.
As a result, the government restrained nine properties in Queens, Staten Island, and Brooklyn belonging to
the defendants.
According to the court filings, the suspects played various roles in the trafficking of counterfeit goods
manufactured in China. Brought by ocean-going ships to the U.S. in 40-foot shipping containers, the goods
were smuggled through ports of entry disguised as legitimate imports and distributed throughout the
country.
Security Industry MonitorIdentity Solutions Sector
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DNA Innovation in Textiles Anti-Counterfeiting Technology
Results of a new study published in the September/October 2018 issue of the American Association of
Textile Chemists and Colorists’ AATCC Review have concluded that DNA molecular tagging is a highly
effective tool to authenticate denim, while maintaining its integrity even after exposed to the rigors of
bleaching and abrasion. The study was conducted by Applied DNA Sciences Inc. and the Fashion Institute
of Technology (FIT). At the FIT labs in New York, denim swatches were treated with unique DNA molecular
tags produced by Applied DNA, then subjected to stone and bleach washings. The samples were then
analyzed at Applied DNA’s laboratories in Stony Brook, where it was proven that the DNA tags remained
intact and suitable for high quality forensic scale analysis. Based on the observed stability, DNA tags of
this kind may soon be ready for testing at a full manufacturing facility to verify the authenticity of the
finished denim garment, Applied DNA reports.
"This technology will enable brands and manufacturers to track their fibers from the farm through to the
finished product, allowing for a more transparent supply chain. Traceability can also help verify certain
sustainability claims about commodities and products, helping ensure good practices and respect for
people and the environment in supply chains," said Sean Cormier, FIT Assistant Professor, Textile
Development and Manufacturing.
The denim authentication problem is significant because most American cotton, including Upland cotton
used to produce denim, is shipped overseas and combined with other cotton where it can lose its identity.
Chinese Police Make the Largest Counterfeit Bust in the Country
On January 17, 2018, The China Daily News reported that fake bank notes with a total face value of more
than 214 million yuan ($33.2 million) were seized after police in Guangdong province busted a prolific
counterfeiting gang.
Police seized the fake bank notes after cracking the biggest counterfeiting case in the nation's modern
history late last year, a senior police official said.
"The case is regarded by the Ministry of Public Security as the country's largest counterfeiting case since
the founding of New China in 1949," said deputy director-general Lin Weixiong of the Guangdong
Provincial Department of Public Security at a news conference on Tuesday in Guangzhou, the provincial
capital.
Bad Air Jordans
On August 8, 2018, U.S.A. Today reported that five people had been charged in New York with trafficking
in 380,000 pairs of counterfeit Nike Air Jordans, sneakers that, if authentic, would have been worth $73
million, according to the NYPD and Homeland Security Investigations.
The counterfeit sneakers looked like real Air Jordans in design and color but lacked the logos that are
registered trademarks, court records said.
December 2018
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51
After the fakes arrived at the Port of Newark from China, they were taken to locations in Brooklyn and
Queens where the logos were added and then distributed for sale, according to NYPD and HSI
investigators.
Ovwe the last two years, the counterfeiting ring shipped 42 containers full of these generic sneakers that
would retail for $190 per pair, court records said.
Canadian Drug Firm Admits Selling Counterfeit and Misbranded Prescription Drugs Throughout the United States
On July 20, 2018, Forbes reported that Kristjan Thorkelson, a resident of Manitoba, Canada, together with
several Canadian companies associated with Thorkelson, including Canada Drugs, Rockley Ventures, and
River East Supplies, admitted today to widespread illegal sales of misbranded and counterfeit prescription
drugs in the United States.
Chief U.S. District Court Judge Dana Christensen sentenced the Canadian companies to forfeit $29 million
of the proceeds of their illegal scheme, to pay a fine of $5 million, and to five years of probation.
Thorkelson and the associated companies were also ordered to permanently cease their operations,
surrender to the United States all domain names and websites from their businesses, and cooperate with
the United States Justice Department and the Food and Drug Administration (FDA) in any further criminal
investigations.
Labs Warn of Dangerous, Contaminated Pot at Dispensaries
On April 20, 2018, WABC News reported that, as of that date, California State Bureau of Cannabis stated
there were only 57 labs statewide to test millions of pounds of marijuana and they cannot test it all yet,
which means much of the marijuana on shelves has not met state standards that went into effect over the
following few months.
According to the Cannabis Industry Association, just 5% percent of cannabis products for sale in the state
of California are tested for safety. In addition, some experts believe as much as half of the marijuana being
grown is contaminated with potentially dangerous chemicals or bacteria.
"Pesticides are one of the things, but there are a variety of pathogenic molds and fungus that can also grow
on cannabis. It can be dangerous to human beings, especially people who have compromised immune
systems," said Steve DeAngelo, who founded the nation's first pot safety testing lab, called Steep Hill in
Berkeley, California. “Up until recently, pot agriculture has been unregulated. California now requires testing
for 66 pesticides, harmful chemicals, and dangerous fungi.”
“Pretty bad growing on a plate, can you imagine what it would look like growing in your lungs?" he added.
Unfortunately, the WABC report notes, “We may know what such an infection would look like. Doctors at
U.C. Davis Medical Center in Sacramento believe a cancer patient died from a rare fungal infection last
February. Researchers were able to trace the illness back to the pot that was supposed to make the patient
feel better.”
Security Industry MonitorIdentity Solutions Sector
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DNA Testing for Cannabis Authenticity and Provenance
On August 1, 2018, TheraCann International Benchmark Corporation, a full service international cannabis
business and facilities project planning, services, and consultant firm, in conjunction with Applied DNA
Sciences, Inc., a leader in molecular technologies for supply chain transparency, announced the launch of
ETCH biotrace™ technology. The molecular "tag and trace" system will be included with TheraCann's
licensing, project management, security, cultivation, and analysis services. TheraCann's platform
anticipates the cannabis regulatory environment by adding capabilities that allow for the forensic tracking
of cannabis and cannabis derivatives across the supply chain. Applied DNA Sciences will provide the
forensic tagging, testing, tracking and provenance for the service.
December 2018
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M&A Review and Outlook
� Identity Solutions product and service companies experienced starkly different M&A activity during the
second and third quarters of 2018. In 2Q18, there was no identity solution M&A activity and very little
identity solution product M&A activity.
The Identity Solutions sector’s M&A activity significantly spiked following the end of 2Q18.
Figure 16: M&A Transactions in the Identity Solutions Sector, 3Q13 to 3Q18
Sources: Imperial Capital, LLC and Capital IQ.
Notable Middle Market Transactions
Transaction activity in the Identity Solutions Sector has picked up in the third quarter of 2018 with an
emphasis on Identity Solutions Services.
� ams AG acquires KeyLemon S.A. for an undisclosed amount
On February 6, 2018, ams AG acquired KeyLemon S.A., a provider of biometric identification and motion
analysis technologies.
� Bi Fintech PTE. Ltd. acquires Korea Framing Institute Co. Ltd for an undisclosed amount
On April 19, 2018, Bi Fintech PTE. Ltd. acquired Korea Framing Institute Co, a developer of authentication
software.
� Zhong Fu Tong Group Co. acquires Time Channel Information Technology Co. for $36 million
On May 11, 2018, Zhong Fu Tong Group acquired Time Channel Information Technology Co., a developer
Security Industry MonitorIdentity Solutions Sector
December 2018
54
� Thales S.A. acquires Gemalto N.V. for $6.7 billion
On December 17, 2017, Thales S.A. acquired Gemalto N.V., a provider of digital security products and
services worldwide.
� HID Global Corporation acquires Cross Match Technologies, Inc. for an undisclosed amount
On September 24, 2018, HID Global Corporation acquired Cross Match Technologies, a manufacturer of
biometric identity management solutions.
Registered Direct and Private Placement Snapshot
The first three quarters of 2018 saw significantly more private placements in the Identity Solutions Sector
than the same period the year prior.
� Visualant, Inc. raised $3.35 in equity and debt
On March 16, 2018, Visualant, Inc., a provider of an identification, authentication, and diagnosis
solution raised $3.35 million from two undisclosed investors.
� Elephant Smart Business raised $.74 million
On February 23, 2018, Elephant Smart Business, a developer of biometric and touch-screen terminals
announced a round of founding from Longford County Enterprise Board, Enterprise Ireland, and other
private investors.
� D-ID announced $4 million in Seed round funding
On January 22, 2018, D-ID, a developer of face recognition defense technology announced a Seed
round of funding led by new investor Pitango Venture Capital.
Public and Rule 144A Debt and Equity Offering Snapshot There was more activity in the Identity Solutions public offerings sector in the first three quarters of 2018
than the first three quarters of 2017.
� Topfield Co., Ltd. received $.93 million in equity
On February 23, 2018, Topfield Co., Ltd. received $.93 million in a follow-on equity offering. The
company engages in medical, bio, kiosk, and biometric physical security.
Bankruptcies There were no significant Identity Solutions bankruptcies in the first three quarters of 2018.
December 2018
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Notable Transactions
Figure 17: Select M&A Transactions in the Identity Solutions Sector, 3Q16 Through 3Q18
Announced / Filing
Date
Closed Date
Target Business Description BuyerTarget
Implied TEV ($mm)
TEV / Revenue
TEV / EBITDA
09/29/2016 5/31/2017Safran Identity and
Security SAS
Safran Identity and Security SAS develops security and identity solutions for people, government, and business applications.
Oberthur Technologies SA (nka:IDEMIA France
SAS); Bpifrance Investissement
$2,726.4 1.5x 12.6x
10/01/2016 11/4/2016Point Grey Research
Inc.
Point Grey Research Inc. designs and manufactures digital cameras for industrial, medical and life science, traff ic, biometric, GIS, and people counting applications.
FLIR Integrated Imaging Solutions, Inc.
$252.5 NA NA
12/13/2016 2/10/2017 NexID Biometrics LLCNexID Biometrics LLC provides spoof mitigation and liveness detection solutions for the biometric authentication industry.
Precise Biometrics AB $3.5 NA NA
01/06/2017 8/10/2017 ID Watchdog, Inc.
ID Watchdog, Inc., through its subsidiary, Identity Rehab Corporation, provides identity theft detection, protection, and resolution services primarily to individuals and families on a subscription basis in the United States.
Equifax Consumer Services, Inc.
$63.0 5.6x 79.2x
02/01/2017 6/7/2017 Delta ID Inc.Delta ID Inc. designs and develops a biometric identity and authentication solution based on iris recognition technology.
Fingerprint Cards AB (publ)
$120.0 NA NA
03/16/2017 5/1/2017 Acculynk, Inc.
Acculynk, Inc. provides payment processing and authentication softw are solutions for online and mobile commerce markets in the United States, China, India, Puerto Rico, and internationally.
First Data Corporation $85.0 NA NA
03/27/2017 3/27/2017 Infracast LtdInfracast Ltd develops and provides mobile communication, identity, and security solutions.
IMImobile PLC $21.0 1.6x 41.7x
04/20/2017 5/9/2017 SecurEnvoy Ltd.SecurEnvoy Ltd. provides mobile phone based tokenless tw o-factor authentication solutions.
Shearw ater Group PLC $25.7 6.2x 9.2x
04/25/2017 10/31/2017 TeleSign CorporationTeleSign Corporation operates a cloud communications platform.
Belgacom International Carrier Services SA
$230.0 2.3x NA
Security Industry MonitorIdentity Solutions Sector
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56
Sources: Capital IQ and Imperial Capital, LLC.
Announced / Filing
Date
Closed Date
Target Business Description BuyerTarget
Implied TEV ($mm)
TEV / Revenue
TEV / EBITDA
06/16/2017 8/10/2017 ID Watchdog, Inc.
ID Watchdog, Inc., through its subsidiary, Identity Rehab Corporation, provides identity theft detection, protection, and resolution services primarily to individuals and families on a subscription basis in the United States.
Equifax Consumer Services, Inc.
$63.0 5.6x 79.2x
07/27/2017 7/27/2017Dhimyotis, Société
Anonyme
Dhimyotis, Société Anonyme develops and delivers solutions for authentication, encryption, electronic signature, time stamping, and storage of probative.
Tessi SA NA NA NA
08/09/2017 8/9/2017 CrossResolve, LLC
As of August 9, 2017, CrossResolve, LLC w as acquired by KeyLogic Systems, Inc. CrossResolve, LLC offers government advisory and strategy services w ith a focus on biometrics, forensics, and identity programs.
LLCAcumen Security, LLC offers product and services certif ication services.
Intertek Group plc NA NA NA
02/06/2018 2/28/2018 KeyLemon S.A.
KeyLemon S.A. provides biometric identif ication and motion analysis technologies that deliver drop-in facial recognition, speaker identif ication, and motion tracking to developers and manufacturers across various industries and institutions.
ams AG NA NA NA
04/19/2018 4/19/2018Korea Framing
Institute Co., Ltd.Korea Framing Institute Co., Ltd. develops authentication security softw are.
Bi Fintech PTE. Ltd. NA NA NA
06/10/2018 6/10/2018Time Channel Information
Technology Co.,Ltd.
Time Channel Information Technology Co.,Ltd. develops platforms for biometric identif ication.
Zhong Fu Tong Group Co., Ltd.
$47.2 4.4x 14.8x
06/30/2018 6/30/2018 SMS Passcode A/SSMS Passcode A/S provides adaptive multi-factor authentication platform to governments, telcos, enterprises, and financial institutions w orldw ide.
Entrust Datacard Corporation
NA NA NA
07/24/2018 7/24/2018 HealthCast Inc.HealthCast Inc. provides access and identity management solutions to health care providers.
Identity Automation Systems, LLC
NA NA NA
December 2018
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Section IV
Information Security Sector
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Information Security Sector
Sector Outlook and Commentary
Threats continue to evolve rapidly with broadening impact beyond data breaches to life safety and
homeland security. Even larger organizations, with well-established Security Operations Centers (SOCs),
are often overwhelmed by massive volumes of alerts from an array of deployed security tools and sensors,
impeding their ability to validate, prioritize, and respond to the most critical threats. The security industry
is now responding to customer demand for higher fidelity alerts, leveraging new technologies such as
artificial intelligence (AI), machine learning (ML), and data analytics. In addition, security spending is
shifting decisively from “point solutions” incapable of communicating with other tools to “integrated
solutions” that collectively strengthen an organization’s overall security posture through enhanced
coordination and visibility.
However, mid-market and smaller organizations face the same security risks as larger organizations, but
have comparatively far more limited resources and few (if any) skilled security analysts within their
information technology (IT) departments. This shortfall has created new opportunities for Managed Security
Services Providers (MSSPs) and specifically Managed Detection and Response (MDR) services to provide
active threat hunting and defense and enable rapid containment and mitigation of threats. According to
market researcher Gartner, emerging services in the MSS market totaled about $940 million in 2016,
through Cloud Access Security Brokers (CASB), network traffic analysis, and threat intelligence platforms.
Driven by the migration of IT workloads to cloud infrastructures and mobile workforces, legacy security
tools are insufficient and out of position to defend against modern threats because network perimeters
has become increasingly less defined and extend well beyond the corporate data center. One of the most
critical challenges facing the industry has been the rapid proliferation of Internet of Things (IoT) devices,
which presents inherent security challenges due to their simplicity and the low prioritization or security
across the industry. Attacks against IoT devices could have real world implications on life safety and
national security, driving greater cyber-physical security convergence and first-ever legislation passed in
the United States mandating the implementation of new security features.
Internet of Things (IoT) Security
Pervasive and persistently connected, IoT devices have enabled tremendous convenience and operational
efficiency while vastly expanding the attack surface and cybersecurity risks for people and organizations.
Market research firm Gartner estimates approximately 8.4 billion IoT devices were in use worldwide in
2017 and expects the installed base will exceed 20 billion devices by 2020. Given perceived cost
constraints, as well as lack of regulation and customer demand, IoT devices typically lack even basic
security protections and often ship with default login credentials (passwords are sometimes even hard
coded), making them exceptionally susceptible to attackers. Given the escalating risks, the IoT security
market is rapidly emerging and security spending is beginning to ramp. According to researcher IoT
Analytics Research, spending for IoT security is expected to reach $4.4 billion in 2022, up from $703
million in 2017, achieving a CAGR of 44%.
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Figure 18: IoT Security Spending, 2017-2022 (in $ millions)
Sources: IoT Analytics Research.
Of particular concern, even if devices can be changed, is that many users still do not apply unique or
strong login credentials. According to a study by vendor ESET, 15% of 12,000 home routers tested had
poor passwords. Even when vulnerabilities are discovered, manufacturers have little or no ability to update
or patch deployed devices. Following the installation of an IoT device, personal information and data can
spread almost immediately around the world with no user interaction or even awareness. According to a
test performed by security vendor Dark Cubed, 12 off-the-shelf IoT devices made over 1.25 million
communications to 3,000+ external servers within a year. We note that IoT security encompasses four
different levels: Device, Communications, Cloud, and Lifecycle Management.
703
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Figure 19: Levels of IoT Security
Sources: IoT Analytics.
Most IoT devices are directly connected to the Internet, making them difficult to defend against threats.
There are generally no security tools or services that sit between these devices and potential attackers. In
addition, IoT devices do not typically have built-in anti-malware capabilities. Attackers do not even need
to develop zero-day exploits because many devices have known vulnerabilities which are not easily
patched by users. As a result, it has proven difficult to break the attack chain, from malware interdiction to
eliminating known vulnerabilities to blocking threats.
Earlier this year, approximately 500,000 routers across more than 50 countries were compromised by a
sophisticated malware system called VPNFilter. This malware could not only steal website credentials and
monitor SCADA protocols, but also had destructive capabilities to make unusable specific devices or
broad swaths of devices. Additionally, attackers have subverted IoT devices to form massive “botnets” to
overwhelm the network resources of targeted organizations and disrupt legitimate usage through
Distributed Denial-of-Service (“DDoS”) attacks.
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Figure 20: VPNFilter Malware Is a Multi-Stage, Modular Platform
Sources: Talos.
One area of particular concern is the extensive reach of China-related device manufacturers and
associated infrastructure, encompassing even innocuous products such as IoT light bulbs, which readily
communicate with servers in China. For example, dimming an IoT lightbulb may require connecting to
China and enabling real-time location sharing through an insecure Android application. Systemic security
flaws represent a major risk to the usage of IoT devices, with potential national security implications.
Ideally, a trusted provider would handle all of the key functions associated with an IoT device, including
firmware, platform, and mobile application.
Unlike profit-motivated cybercriminals, nation-states are primarily focused on gaining strategic
advantage. Security researchers and leaders have widely noted the risks of compromised supply chains
and critical infrastructure by potential adversaries. Secure and trusted communications will become
increasingly critical to mitigate the threats to IoT devices. Cost is not a major impediment for
manufacturers because secure devices, applications, and infrastructures are marginally more expensive
than insecure IoT devices. However, given limited attention by manufacturers to the security of IoT
devices, it is not readily apparent for purchasers to differentiate between secure and insecure products
and applications.
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Figure 21: IoT Device Overview
Sources: Dark Cubed.
Insecure IoT devices typically operate on platforms without encrypted communications (or attackers can
easily bypass poorly implemented encryption). Given the prevalence of known vulnerabilities, it appears
likely that manufacturers rarely (if ever) perform security reviews of their IoT devices to prevent attackers
from observing unencrypted communications between these devices and the cloud. In addition, many IoT
devices can be controlled by smart phones through Android-based mobile applications. Some of these
applications require key permissions, which could allow the compromise of passwords, malware injection,
or data theft from other mobile applications. From a privacy perspective, personal data can be mined for
advertising purposes or worse. Applications also frequently communicate to web servers located globally.
Cyber-Physical Security Convergence
Expanding integration of IoT, sensors, devices, and automated systems has real world implications on life
safety and operational stability, blurring the distinction between historically separate silos of physical and
logical security. Both functions must now collaborate and exchange information, which will increasingly
shift the security industry from a reactive to pro-active/prevention model. Industry stakeholders are
rapidly adapting to the modern threat environment, with the goal of elevating the capabilities of physical
security systems with more hardened solutions and built-in protections for connected devices. Recently,
Underwriters Laboratories (UL), an independent global safety consulting and certification organization,
initiated its Cybersecurity Assurance Program (UL CAP), which creates standards and testable criteria in
order to assess vulnerabilities and minimize risks of connect devices. UL CAP could broadly reduce the risk
of exploitation and prevent impact from known malware, while enhancing security controls and
expanding security awareness. UL CAP could benefit from broad-based adoption because it leverages the
set of standards from UL 2900 developed in coordination with major stakeholders across government,
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industry, and academia. Given the broadening threat environment, security integrators are increasingly
offering “Cybersecurity-as-a-Service” and are working to evolve their businesses from traditional hardware
or monitoring services to full-spectrum solution providers, generating actionable intelligence and
enabling real-time situational awareness for organizations across a broad range of vertical markets.
Emerging Legislation on IoT Security
Given the systemic problems of securing IoT devices and minimal industry incentives, government
regulation could become increasingly prevalent over the coming years. In October 2018, the state of
California passed one of the first ever IoT cybersecurity laws in the United States, which was signed by
Governor Jerry Brown. This law, known as Senate Bill No. 327 Information privacy: connected devices,(SB
327) prohibits the sale of Internet-connected devices with weak default passwords and mandates that
manufacturers implement “reasonable security features” into their IoT devices in order to prevent
unauthorized access or data breaches. In practical terms, new IoT devices will be shipped with a unique
password and/or users will have to create a new password. While SB 327 does not specify exactly how
vendors should secure their devices, it does state that new products must contain “a security feature that
requires a user to generate a new means of authentication before access is granted to the device for the
first time.”
This law will be effective starting January 1, 2020, which could have far-reaching global impact, given the
vast deployments of IoT devices, notable vendors, and scale of the California market. One area this law
does not cover is a mandate for continuous security enhancements, including security patches for known
vulnerabilities. Future legislation may broaden the scope of SB 327 and other U.S. states could use SB 327
as a framework for similar legislation. There are a number of federal IoT security bills currently in the
works, but they have not been voted on by Congress. For example, the IoT Cybersecurity Improvement
Act of 2017 sets minimum security standards for IoT devices that are purchased by the federal
government. Another bill, the IoT Consumer TIPS Act of 2017, would help educate consumers about IoT
devices through the Federal Trade Commission (FTC). Lastly, the SMART IoT Act would study the state of
the industry through the Department of Commerce.
While SB 327 is widely considered a step in the right direction, critics have questioned why the legislation
didn’t mandate the removal of insecure features such as listening ports and Web management cross-site
scripting and SQL injection issues. Additionally, SB 327 does not include rules around other, non-
password authentication systems.
Rise of the Machine: Machine Learning and Artificial Intelligence in Cybersecurity
In the security operations center (SOC), human analysts simply cannot scale to what is fundamentally a
machine problem. Organizations have deployed countless point solutions and security tools, each
generating alerts on possible intrusions and compromises, but generally without context or actionable
insights. Escalating volumes of false positives and non-critical alerts are overwhelming SOC analysts, who
can only investigate and validate a finite number of security incidents per day. As a result, organizations
are increasingly adopting data analytics platforms based on machine learning (ML) and artificial
intelligence (AI) technologies to correlate large data sets, help validate alerts, and enable faster response.
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Of particular note, these platforms are not likely to supplant human SOC analysts for the foreseeable
future, but will augment their capacity by offloading mundane and repetitive tasks. Analytics represent a
significant “force multiplier” and enable skilled human analysts to focus on the most critical and
sophisticated threats that require high levels of experience and knowledge.
One of the key drivers is the massive and widening shortage of cybersecurity talent, which has been
widely reported by industry trade journals. This trend is raising the urgency for solutions that improve the
security posture of organizations without simply adding to the noise. While ML is not a “new” technology,
what has changed is the accelerating speed of iterative and complex mathematical calculations to big
data automatically (thereby learning from previous calculations) and independently adapting based on
new data. According to analytics vendor SAS, machine learning is “a method of data analysis that
automates analytical model building. It is a branch of artificial intelligence based on the idea that systems
can learn from data, identify patterns and make decisions with minimal human intervention.” For
reference, SAS cited several high profile examples of ML applications, such as Google’s self-driving car
and selection recommendations by Amazon and Netflix.
ML is a major sub-field of AI, which enables machines to perform human-like tasks by finding and
learning from patterns in the data and adjusting to inputs. AI has been buoyed by recent breakthroughs in
deep learning, as well as advanced algorithms and ramping computer processing power and storage. AI
systems must learn from large volumes of data, granular data, and diverse data in order to be trained for
a specific and highly specialized task. Of particular note, self-learning systems are not autonomous
systems and complement human abilities. Enterprise security software that leverages AI can automate
threat detection and response, helping to efficiently identify threats. Some systems utilize multiple
algorithms trained on different data sets to more effectively detect anomalies and minimize false
positives. One notable ML application in cybersecurity has been User and Entity Behavior Analysis (UEBA),
which looks for unusual behavior or patterns compared with baseline activity. As such, the detection and
blocking of potentially malicious activity does not rely upon known signatures.
False positives remain the critical weakness of legacy security tools and consume substantial analyst
resources, while also obscuring real and potentially critical threats. According to cybersecurity certification
and training organization SANS Institute, this wasted activity costs organizations about $1.3 million
annually because analysts are responding to “inaccurate and erroneous intelligence” or “chasing
erroneous alerts.” However, AI/ML-based cybersecurity solutions are not effective (both false positives
and false negatives) without training the system on sufficient volumes of the right data. Human analysts
will remain crucial to investigate and validate alerts, while benefiting from a platform that can process
massive volumes of network activity data without extensive teams and legacy tools.
It is important to note that AI/ML technologies are equally available to attackers and defenders. Attacks
could match the ability of humans, but at much higher velocity, ultimately resulting in more affected
organizations and individuals. AI/ML enables far greater automation and scale at lower cost, with learning
capabilities finding vulnerabilities and more precise targeting. These advantages will need to be countered
by defenders with the same capabilities and perpetuating the arms race in cybersecurity.
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M&A Review and Outlook
� M&A activity in the Information Security Sector continued to show strength through the end of
2017 and beginning of 2018 and then slowed following the end of 1Q18
Figure 22: M&A Transactions in the Information Security Sector, 3Q13 to 3Q18
Sources: Imperial Capital, LLC and Capital IQ.
Notable Middle Market Transactions
� Palo Alto Networks, Inc. acquired Evident.io, Inc. for $300 million
On March 14, 2018, Palo Alto Networks, Inc. acquired Evident.io, Inc., a provider of a software platform for
enterprise security management.
� Bomgar Corporation acquires Avecto Limited for an undisclosed amount
On July 10, 2018, Bomgar Corporation acquired Avecto Limited, a provider of endpoint security software
solutions that protect businesses from advanced threats.
� Okta, Inc. acquires AuthClub, Inc. for an undisclosed amount
On July 18, 2018, Okta, Inc. acquired AuthClub, Inc., a provider of a tool to manage authentication across
applications and clouds.
� Imperva, Inc. acquires Prevoty, Inc. for $140.6 million
On July 26, 2018, Imperva, Inc. acquired Prevoty, Inc., a provider of web application security.
� Cisco Systems, Inc. acquires Duo Security, Inc. for $2.35 billion
On August 2, 2018, Cisco Systems, Inc. acquired Duo Security, Inc., a provider of cloud-based access
protection solutions.
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Registered Direct and Private Placement Snapshot
Private placement was significantly greater in first three quarters of 2018 than 2017.
� Threat X, Inc. received $8.2 million in a Series A round
On April 4, 2018, Threat X, Inc., which operates as an intelligent security management company, raised
$8.2 million in a Series A round led by new investors Grotech Ventures and Access Venture Partners.
� StackRox, Inc. received $25 million in a Series B round
On April 10, 2018, StackRox Inc., a provider of an online threat protection platform raised $25 million in a
Series B round led by Redpoint Ventures.
� Exabeam, Inc. received $50 million in a Series D round
On August 14, 2018, Exabeam Inc., a provider of a behavior-based security intelligence platform, received
$50 million in a Series D round led by existing investor Lightspeed Venture Partners.
Public and Rule 144A Debt and Equity Offering Snapshot
Public offerings in the Information Security Sector maintained started off strong in the first quarter of
2018. The Information Security Sector has seen more activity in the first three months of 2018 than 2017.
� Zscaler, Inc. raised $192 million in an IPO
On February 16, 2018, Zscaler received $192 million in an IPO. The company operates as a cloud security
company.
� Rapid7, Inc. raised $114 million in a follow-on equity offering
On January 23, 2018, Rapid7, Inc. raised $114 million in a follow-on equity offering. The company provides
analytics solutions for security and information operations.
Bankruptcies
There was one notable Information Security Solutions bankruptcy in first three quarters of 2018.
� Giant Gray, Inc. filed for bankruptcy in 2Q18
On April 13, 2018, an involuntary petition for liquidation under Chapter 7 was filed against Giant Gray, Inc.
in the U.S. Bankruptcy Court for the Southern District of Texas. Giant Gray, Inc. develops a multi-sensor
data-fusion/cognitive neurolinguistics software platform that teaches itself to recognize and alert users on
abnormal behavior patterns.
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Notable Transactions
Figure 23: Select M&A Transactions in the Information Security Sector, 3Q16 Through 3Q18
Announced / Filing Date
Closed Date Target Business Description BuyerTarget
Implied TEV ($mm)
TEV / Revenue
TEV / EBITDA
09/07/2016 4/3/2017Intel Security Inc. (nka:McAfee
LLC)
Elitecore Technologies Pvt. Ltd. provides OSS/BSS and Internet security solutions to configure, manage, and monitor netw ork and subscriber activities.
TPG Capital, L.P. $4,156.9 NA NA
11/01/2016 12/1/2016 Camber Corporation
Camber Corporation provides engineering and technical services, cyber operations technology, mission critical support services, and training solutions to the United States federal agencies and aff iliates, and international government and commercial customers.
Huntington Ingalls Industries, Inc.
$345.0 0.9x 8.6x
11/05/2016 2/27/2017 EarthLink Holdings Corp.
As of February 27, 2017, EarthLink Holdings Corp. w as acquired by Windstream Holdings, Inc. EarthLink Holdings Corp. provides managed netw ork, security, and cloud services to business and residential customers in the United States.
Windstream Holdings, Inc. $1,060.7 1.1x 5.1x
11/20/2016 2/9/2017 LifeLock, Inc.LifeLock, Inc. provides identity theft protection services for consumers; and consumer risk management services for enterprises in the United States.
Symantec Corporation $2,362.1 3.6x 50.0x
11/22/2016 11/22/2016MacDonald Humfrey
(Automation) Ltd. (nka:L-3 MacDonald Humfrey)
L-3 MacDonald Humfrey provides engineering, procurement, and construction services in the United Kingdom.
L-3 Communications Holdings, Inc. (nka:L3
Technologies, Inc.)$315.8 NA NA
12/05/2016 1/19/2017 IntraLinks Holdings, Inc.View finity, Inc. provides generation application control and privilege management solutions for securing desktop, laptop, and server environments in enterprises.
Synchronoss Technologies, Inc.
$855.5 2.9x 42.8x
02/08/2017 3/22/2017 Invincea, Inc. Invincea, Inc. develops endpoint security softw are solutions. Sophos Group plc $120.0 12.2x NA
03/06/2017 4/3/2017 Veracode, Inc. Veracode, Inc. provides a cloud-based application security platform. CA, Inc. $614.0 NA NA
03/08/2017 4/4/2017 Sotera Defense Solutions, Inc.Sotera Defense Solutions, Inc., a security technology company, provides technology-based systems, solutions, and services for national security agencies and programs of the U.S. government.
The KEYW Corporation $350.3 1.3x 15.6x
04/27/2017 7/31/2017 Viptela, Inc.Viptela, Inc. provides softw are-defined w ide area netw ork (SD-WAN) technology that allow s global companies to build carrier agnostic, policy-controlled, and cost-effective WANs.
Cisco Systems, Inc. $610.0 NA NA
05/04/2017 5/31/2017 Thinklogical LLCThinklogical LLC designs and manufactures signal extension and sw itching systems to access, transport, distribute, display, and analyze video-rich big data.
Belden Inc. $160.0 3.1x 9.3x
05/26/2017 5/26/2017 Sandvine CorporationAs of September 21, 2017, Sandvine Corporation w as acquired by Procera Netw orks, Inc. Sandvine Corporation provides netw ork intelligence products for netw ork operators w orldw ide.
Vector Capital; Vector Capital V, L.P.
$408.8 3.6x 24.0x
06/05/2017 9/1/2017 Westcon Group, Inc.Westcon Group, Inc., a technology distributor, provides security, collaboration, netw orking, and data center products to customers in the United States and internationally.
SYNNEX Corporation $830.0 0.2x 15.8x
06/12/2017 8/1/2017ViaWest, Inc. (nka:Flexential
Colorado Corp.)Flexential Colorado Corp. provides information technology (IT) and infrastructure solutions for businesses in North America.
Information Security Sector Security Industry Monitor
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Sources: Capital IQ and Imperial Capital, LLC.
Announced / Filing Date
Closed Date Target Business Description BuyerTarget
Implied TEV ($mm)
TEV / Revenue
TEV / EBITDA
07/12/2017 7/12/2017 Komand, Inc.Komand, Inc. develops a security orchestration and automation system platform.
Rapid7, Inc. $14.8 NA NA
07/25/2017 9/13/2017 Guidance Softw are, Inc.Guidance Softw are, Inc., a technology company, provides forensic security solutions in the United States, Europe, Asia, and internationally.
Open Text Corporation $245.2 2.3x NM
09/25/2017 9/25/2017 CIS Secure Computing, Inc.
Skyhigh Netw orks, Inc., a cloud access security company, enables companies to embrace cloud services w ith appropriate levels of security, compliance, professional services, healthcare, high technology, media and entertainment, manufacturing, and legal customers.
Acorn Grow th Companies; Acorn Grow th Capital
Fund IV, L.P.NA NA NA
11/27/2017 1/3/2018 Skyhigh Netw orks, Inc.
Skyhigh Netw orks, Inc., a cloud access security company, enables companies to embrace cloud services w ith appropriate levels of security, compliance, professional services, healthcare, high technology, media and entertainment, manufacturing, and legal customers.
McAfee LLC NA NA NA
12/17/2017 12/17/2017 Gemalto N.V. Gemalto N.V. provides digital security products and services w orldw ide. Thales S.A. $6,341.1 1.8x 13.1x
12/19/2017 12/19/2017 Cloud Harmonics Inc. Cloud Harmonics Inc. offers cloud-based security solutions. Ingram Micro Inc. NA NA NA
02/27/2018 4/9/2018 Phantom Cyber CorporationPhantom Cyber Corporation provides security automation and orchestration platform that orchestrates key stages of security operations from prevention to triage and resolution.
Splunk Inc. $350.0 NA NA
03/06/2018 3/12/2018 First Base Technologies LLPFirst Base Technologies LLP provides cyber security testing and consulting services.
Falanx Group Limited $4.5 1.8x 5.3x
03/29/2018 3/29/2018 FourV Systems, LLCFourV Systems, LLC develops a cyber security softw are for operations, analytics, and reporting.
08/22/2018 10/1/2018 Iron Man Protection, LLCIron Man Protection, LLC provides security solutions and risk management services to individuals, corporations, and governments w orldw ide.
Optium Cyber Systems, Inc.
NA NA NA
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Security Industry Monitor
Section V
Unmanned Aerial Systems Sector
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Security Industry Monitor
Unmanned Aerial Systems Sector
Sector Outlook and Commentary
Historically exclusive to the defense and homeland security industries, advancements in technology –
particularly propulsion systems, control systems, software, and cameras – has led to significant growth in
commercially available Unmanned Aerial Systems (UAS) as well as the understanding of their value
proposition for many different non-military applications. Whereas the term “UAV” indicates the actual
aircraft (aka “Drone”), the term “UAS” refers to an Unmanned Aerial System where the system may include
the UAV itself as well as a ground-based controller, communications, etc.
We believe implications for the security industry are far reaching with potential applications for public
safety and security, private security and guarding as well as home security. UAS’ can provide a cost
effective additional layers of protection, enhancing providers’ security offering and potentially reducing
operating costs.
We believe drones are beginning to reach market acceptance with companies across industries realizing
the benefits – both in terms of cost savings and direct ROI – of using drones. More large corporations are
starting pilot programs, hiring drone services companies or setting up in-house drone programs. Large
traditional aerospace and defense companies are participating in the sUAS market through corporate
venture investments, having become more active in 2018.
For security, we see large integrators beginning pilot programs for perimeter security of industrial, oil &
gas, warehouse, and other facilities.
With adoption increasing across industries, hurdles remain before companies can fully reap the benefits of
drones, particularly autonomous operations, flying in urban environments and over people. The recent
passing of the FAA Reauthorization Act of 2018 laid the groundwork for further development of the drone
ecosystem and integration into the National Air Space (NAS).
U.S. Regulation and Airspace Safety
With the passing of the FAA Reauthorization Act of 2018 (H.R. 302), a significant step forward was taken
towards UAS integration into the NAS. Most importantly, in our view, H.R. 302 includes provisions
outlining the implementation of an UAS Traffic Management system (UTM), Beyond Visual Line-of-Sight
(BVLOS) as well as remote ID – all significant pieces of the UAS integration pyramid. Pieces of the
legislation that are important for security providers exploring and /or implementing drone programs
include:
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� Repeal of Section 336 from the FAA Reauthorization Act of 2012, a carve out for recreation sUAS
operators.
Why It’s Important: Includes specific language related to remote ID for recreational sUAS,
paving the way for a fully integrated Remote ID system which is required for drone integration
into the NAS.
� Authorizing the establishment of the Unmanned Aircraft Systems Integration Pilot Program (UAS
IPP) as stated in a Presidential Memo from October 2017.
Why It’s Important: The UAS IPP section H.R. 302 specifically includes provisions for:
� Testing and validating new BVLOS, focusing on detect and avoid technologies, command
and control links, navigation, weather, and human factors
� Addressing concerns regarding potential security and safety risks with UAS operating
near people and critical infrastructure
� Part 107 transparency and revision of waiver and certificate authorization process.
Why It’s Important: Under the provision, the FAA is required to publish on its website a sample
of safety justifications1 provided by sUAS operators that have been approved for each regulation
waived or class of airspace authorized. This will remove the current opaqueness surrounding the
circumstances for which waivers or certifications were granted easing the waiver application
process.
� Mandating the FAA establish a pilot program through September 30, 2023 to utilize available
remote detection or identification technologies for safety oversight as well as enforcement
actions against operators breaking aviation laws and regulation.
Why It’s Important: For UAS autonomy in the NAS, law enforcement authorities need the
capability for real-time tracking of drone operations as well as knowledge of the owner and/or
operator, particularly for the investigation of incidents and enforcement actions when necessary.
� Directs the FAA to develop a plan for implementation of UTM services that expand BVLOS
operations. Establishes a primary objective of UTM to “permit blanket waiver authority” to allow
UAS operation approved by a selected (by the FAA) UTM services provider instead of the current
case-by-case waivers under Part 107.
Why It’s Important: With the support of Congress, the FAA now has clear support and direction
to develop UTM which is required for a fully integrated NAS. The mandated objective of using
UTM services for approved flight instead of the case-by-case waiver will significantly reduce the
time to drone deployment as well as provide more UAS operators the ability to fly.
1 When applying for a waiver, UAS operators are required to provide an explanation of hazards and risks associated with the
proposed flight, justifying that the operation is safe
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Security Industry Monitor
UAS Integration into the U.S. National Airspace
With the passing of H.R. 302, the U.S. government has communicated its commitment to UAS integration
as well as a potential plan on how to implement it through the FAA, partner agencies (such as NASA) and
industry stakeholders. More importantly, security practitioners across commercial, HLS, first responders
and search and rescue (S&R) are now provided with a structured approach to UAS integration, eventually
leading to UAS operations in urban environments, BVLOS, at night and above people.
With the commitment to infrastructure, now comes the implementation stage. Most importantly, for full
UAS integration, the industry will need several components to come together to create a complete UTM
system including: Aircraft deconfliction – at scale, remote ID, reliable and secure communications,
advanced collision detection and avoidance, and automatic safe landing mechanisms.
Figure 24: The Path to Full UAS Integration
Sources: FAA.
For security providers and public safety agencies, H.R. 302 enables the formal groundwork to be laid for
autonomous drone patrols and automatic event response – either around the perimeter or even
throughout a city. Currently, a drone cannot be flown without an operator or Remote Pilot in Command
(RPIC) having visual line of sight (VLOS) of the drone or at night or above people without a special waiver
from the FAA, limiting capabilities and where a drone can be used. Urban environments remain relatively
off-limits based on the current NAS drone infrastructure.
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With a fully integrated UTM system and BVLOS operations permitted, an industrial park near a busy
airport could deploy drone-in-a-box solutions, pre-set drone patrol time, instantaneously get a flight plan
approved through a LAANC services provider and communicate those plans to other operators and/or
directly to other drones in the area. For urban environments, this could mean a fleet of drone stations
deployed throughout a city patrolling autonomously or launching automatically in response to an event
that could be miles away without the need for human supervision.
Figure 25: UTM Structure
Sources: Airmap, Imperial Capital, LLC.
Aircraft Deconfliction – The UAS Service Suppliers
As part of the first step towards UTM, the FAA began the roll-out of its Low Altitude Authorization and
Notification Capability (LAANC) program earlier this year. LAANC provides real-time processing of airspace
authorization requests for UAS operations in controlled airspace instead of the drone operator needing to
request a special waiver from the FAA, which could take up to 90 days. Flight approval can be obtained by
using one of the numerous UAS Service Suppliers (USS) authorized by the FAA. In our April 2018 Security
Monitor there were four approved providers – Airmap, Project Wing, and Skyward (a Verizon company).
Since then, the FAA has expanded the list of authorized USSs under LAANC to 11 providers and has rolled
out the program nationwide, opening 99% of U.S. airspace to commercial drone activity.
Before granting authorization for a drone flight, a USS’s solution will collect and process numerous data
points from sources including the FAA’s Air Traffic Management (ATM) and Flight Information
Management Systems (FIMS), as well as weather and terrain information. That information is then
synthesized with flight information provided by the drone operator regarding altitude, waypoints, flight
time, type of drone, etc. Additionally, while planning a flight, a drone operator will receive information
regarding any advisories including flight restrictions, if any.
December 2018
Unmanned Aerial Systems Sector
77
Security Industry Monitor
Figure 26: M&A Approved LAANC UAS Service Suppliers
Sources: FAA.
Figure 27: UAS Service Suppliers Operations and Data Flow
Sources: FAA.
December 2018
78
Security Industry MonitorUnmanned Aerial Systems Sector
Select UAS Service Suppliers
� Aerodyne: Based in Cape Canaveral, FL, Aerodyne is a provider of drone-based enterprise
solutions using AI for large scale data capture and analytics. Aerodyne’s solution provides sUAS’s
with real-time data analysis enabling autonomous flight through UTM, as well as airspace and
flight path management.
� Airmap: Santa Monica, CA-based Airmap is a leading airspace services platform for UAS. Airmap’s
solutions enable flight planning, operation authorization request and approval, drone
identification, and traffic management leading to a quick, safe and lawful drone operation in
Ticker Company Name Ticker Company NameNYSE:UTX United Technologies Corporation TSEC:3454 Vivotek IncNasdaqGS:VRNS Varonis Systems, Inc. NYSE:VMW VMware, Inc.NASDAQSC:VDSI VASCO Data Security International, Inc. TSEC:6131 Yoko International Corp.NYSE:PAY VeriFone Systems, Inc. NASDAQNM:ZBRA Zebra Technologies CorporationNASDAQGS:VRNT Verint Systems Inc. SZSE:002236 Zhejiang Dahua Technology Co., Ltd.AMEX:VSR Versar, Inc. BSE:531404 Zicom Electronic Security Systems LimitedAMEX:VII Vicon Industries, Inc. NasdaqGS:ZIXI Zix Corporation
Ticker Company Name Ticker Company NameTASE:AFHL AFCON Holdings Ltd. NYSE:JCI Johnson Controls International plcTSX:AF AlarmForce Industries Inc. GTSM:5251 JSW Pacific CorporationNYSE:ALLE Allegion plc NasdaqGS:KTOS Kratos Defense & Security Solutions, Inc.NASDAQNM:ALOG Analogic Corporation NYSE:LLL L3 Technologies, Inc.NYSE:AXE Anixter International Inc. OM:LOOM B Loomis AB (publ)OTCBB:ANVS ANV Security Group, Inc. OTCPK:MACE Mace Security International, Inc.NASDAQ:AOBC American Outdoor Brands Corporation NASDAQNM:MAGS Magal Security Systems Ltd.NasdaqGM:ARTX Arotech Corporation DB:MBQ Mobotix AGNASDAQGS:ASCM.A Ascent Capital Group, Inc. NYSE:MSA MSA Safety IncorporatedOM:ASSA B ASSA ABLOY AB (publ) NASDAQNM:NSSC Napco Security Technologies, Inc.TSEC:8072 AV TECH Corporation AIM:NWT Newmark Security plcTSEC:3669 AVer Information Inc. TASE:NICE NICE Ltd.TSX:AVO Avigilon Corporation TASE:ORAD Orad Ltd.OM:AXIS Axis AB (publ) NASDAQNM:OSIS OSI Systems, Inc.NASDAQGS:AAXN Axon Enterprise, Inc. NASDAQ:PNTR Pointer Telocation Ltd.XTRA:BSL Basler Aktiengesellschaft CATS:PSG Prosegur Compañía de Seguridad, S.A.AMEX:MOC Command Security Corporation ASX:QTG Q Technology Group LimitedTSX:CSU Constellation Software Inc. LSE:QQ. QinetiQ Group plcNasdaqGS:CTRL Control4 Corporation AMEX:RWC RELM Wireless CorporationNYSE:CXW CoreCivic, Inc. NYSE:ROP Roper Technologies, Inc.OTCPK:CSTI Costar Technologies, Inc. ENXTPA:SU Schneider Electric S.E.NYSE:CTS CTS Corporation TSE:9735 SECOM CO., LTD.NYSE:DHR Danaher Corporation OM:SECU B Securitas ABNYSE:DBD Diebold Nixdorf, Incorporated SZSE:002528 Shenzhen Infinova LimitedNasdaqCM:DGLY Digital Ally, Inc. DB:SIE Siemens AktiengesellschaftSWX: DOKA dormakaba Holding AG LSE:SMIN Smiths Group plcGTSM:5489 DynaColor, Inc. NYSE:SWK Stanley Black & Decker, Inc.TSEC:5484 EverFocus Electronics Corporation TSEC:9925 Taiwan Shin Kong Security Co.,Ltd.NYSE:FSS Federal Signal Corporation SEHK:8051 CircuTech International Holdings LimitedNASDAQNM:FLIR FLIR Systems, Inc. NYSE:BCO The Brink's CompanyNYSE:FBHS Fortune Brands Home & Security, Inc. NYSE:GEO The GEO Group, Inc.LSE:GFS G4S plc NYSE:TMO Thermo Fisher Scientific Inc.TSEC:3356 GeoVision Inc. NASDAQNM:TRMB Trimble Inc.OTCPK:GRDH Guardian 8 Holdings NYSE:TYL Tyler Technologies, Inc.OM:GUNN Gunnebo AB NASDAQGS:UBNT Ubiquiti Networks, Inc.SZSE:002415 Hangzhou Hikvision Digital Technology Co., Ltd. NYSE:UTX United Technologies CorporationNYSE:HON Honeywell International Inc. NASDAQGS:VRNT Verint Systems Inc.NASDAQ:IDSY I.D. Systems, Inc. AMEX:VSR Versar, Inc.NASDAQCM:ISNS Image Sensing Systems, Inc. AMEX:VII Vicon Industries, Inc.OTCPK:IMSC.Q (Invalid Identifier) TSEC:3454 Vivotek IncAIM:IND IndigoVision Group plc TSEC:6131 Yoko International Corp.OTCBB:ISCI ISC8 Inc. SZSE:002236 Zhejiang Dahua Technology Co., Ltd.NASDAQ:ITRN Ituran Location and Control Ltd. BSE:531404 Zicom Electronic Security Systems Limited
Figure 35: Information Security Sector—Select Comparable Companies
Sources: Imperial Capital, LLC.
Ticker Company Name Ticker Company NameNYSE:MMM 3M Company OTCPK:IWSY ImageWare Systems, Inc.NASDAQNM:ACXM Acxiom Corporation ENXTPA:INSD INSIDE SecureNasdaqCM:APDN Applied DNA Sciences, Inc. NASDAQNM:INTX Intersections Inc.TSX:AVO Avigilon Corporation TSXV:NTS Nanotech Security Corp.NASDAQ:BKYI BIO-key International, Inc. NASDAQNM:UEPS Net 1 UEPS Technologies, Inc.NASDAQNM:DMRC Digimarc Corporation NASDAQ:OTIV On Track Innovations Ltd.LSE:EXPN Experian plc OM:PREC Precise Biometrics ABNasdaqGS:FEYE FireEye, Inc. ENXTPA:SAF Safran SAENXTAM:GTO Gemalto N.V. NASDAQSC:VDSI VASCO Data Security International, Inc.NasdaqCM:INVE Identiv, Inc. NASDAQNM:ZBRA Zebra Technologies Corporation
Ticker Company Name Ticker Company NameNasdaqGS:AKAM Akamai Technologies, Inc. NYSE:IBM International Business Machines CorporationOTCPK:AVGT.F AVG Technologies N.V. OTCPK:ISCI ISC8 Inc.NYSE:CUDA Barracuda Networks, Inc. NYSE:JNPR Juniper Networks, Inc.NASDAQNM:CA CA, Inc. NYSE:MSI Motorola Solutions, Inc.NASDAQGS:CAVM Cavium, Inc. TSE:6701 NEC CorporationNASDAQNM:CHKP Check Point Software Technologies Ltd. NYSE:ORCL Oracle CorporationOTCPK:CBRI.Q Ciber, Inc. NYSE:PANW Palo Alto Networks, Inc.NasdaqGS:CSCO Cisco Systems, Inc. NasdaqGM:PFPT Proofpoint, Inc.NasdaqGS:CTXS Citrix Systems, Inc. NasdaqGS:QLYS Qualys, Inc.NasdaqGS:CYBR CyberArk Software Ltd. NasdaqGS:RDWR Radware Ltd.NasdaqCM:CYRN CYREN Ltd. NYSE:SSNI Silver Spring Networks, Inc.NASDAQGS:FFIV F5 Networks, Inc. NasdaqGS:SPLK Splunk Inc.NasdaqGS:FEYE FireEye, Inc. OTCBB:SFOR StrikeForce Technologies, Inc.NasdaqGS:FTNT Fortinet, Inc. NasdaqGS:SYMC Symantec CorporationAMEX:GSB GlobalSCAPE, Inc. NasdaqGS:KEYW The KEYW Holding CorporationNasdaqGM:GUID Guidance Software, Inc. TSE:4704 Trend Micro IncorporatedNYSE:HPQ HP Inc. NasdaqGS:VRNS Varonis Systems, Inc.NASDAQ:IMPV Imperva, Inc. NYSE:VMW VMware, Inc.NasdaqGS:INTC Intel Corporation NasdaqGS:ZIXI Zix Corporation
Appendix Security Industry Monitor
December 2018
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December 2018 2017
AppendixSecurity Industry Monitor
95
Valuations—Security Industry Companies
Physical Security Companies
Figure 36: Large Industrials
Note: Tyco International Ltd. was acquired by Johnson Controls Inc. on Jan 25, 2016
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Physical Security - Large Industrials
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Physical Security - Public Safety & Justice
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Physical Security - Security Equipment
Figure 39: Explosives Detection and Security Sensors
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
Figure 40: Alarm Monitoring
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Physical Security - Explosives Detection & Security Sensors
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Physical Security - Guard Services
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Identity Solutions - Intelligent Video Companies
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Identity Solutions - Chinese Video Companies
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Identity Solutions - Products
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
Figure 46: Services
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Identity Solutions - Location & Tracking
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018
Enterprise value is defined as market capitalization plus net debt, minority interest, and preferred equity. .
Italicized, NA, and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Diversified Technology Leaders
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Government Services
BA The Boeing Company $352.74 89.5% $200,315.9 $202,281.9 $96,943.0 18.8 13.0 2.1 2.1 2.2 16.1 23.3 16.7 N/M 0.1 1.4
Government and Integration Services Companies, continued
Figure 50: Security Systems Integration—Diversified
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Security Systems Integration - Diversified t
SIE Siemens AG $116.79 81.9% $94,608.4 $119,238.3 $96,484.3 29.9% 11.0% 1.2x 1.4x 1.2x 11.2x 11.0x 10.1x 13.7x 2.0x 1.8
SU Schneider Electric SE 73.12 82.0 40,168.7 48,962.3 29,036.3 38.6 16.2 1.7 1.9 1.6 10.4 12.2 10.3 15.2 1.5 1.7
JCI Johnson Controls Inc. 34.77 83.7 32,129.5 44,218.5 31,400.0 29.9 15.0 1.4 1.9 1.4 9.4 15.3 9.6 13.3 2.3 1.4
SWK Stanley Black & Decker, Inc. 131.19 74.3 19,817.6 25,443.6 13,592.5 36.5 16.4 1.9 2.2 2.0 11.4 13.6 12.2 17.7 2.2 1.6
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Physical - Defense UAS
BA The Boeing Company $352.74 89.5% $200,315.9 $202,281.9 $96,943.0 18.8 13.0 2.1 2.1 2.2 16.1 23.3 16.7 N/M 0.1 1.4
Enterprise Value is defined as market capitalization plus net debt, minority interest and preferred equity.
NA and NM values are excluded from mean and median calculations.
Any foreign securities are converted to USD for historical LTM figures as of the filing date, and for the equity price as of the most recent closing date.
Sources: Imperial Capital, LLC, Capital IQ, and Company SEC Filings.
($ in millions except stock price)
Stock Price % of 52 Market Enterprise LTM LTM Gross LTM EBITDA EV / Sales EV / EBITDA P/E Net Debt / PEG
Ticker Company (12/4/2018) Week High Cap Value (EV) Revenue Margin % Margin % LTM CY2016 CY2017 LTM CY2016 CY2017 FY2017 LTM EBITDA CY2018Physical - Counter UAS t
AIR Airbus SE $107.04 84.8% $83,029.5 $85,547.2 $80,377.6 13.5% 9.1% 1.1x 1.2x 1.1x 11.8x 48.9x 15.9x 26.7x 0.3x 1.0
