GE considers selling its security business

August 27, 2009

News reported this week indicates that GE is considering selling its security business.  GE built up a substantial security business through the acquisitions of Interlogic, InVision Technologies and Edwards Systems. The likely buyers line up as a who’s who of the Fire and Security Industry with United Technologies, Tyco International, Honeywell and Siemens all active in the major markets. This is just another step in the ultimate consolidation of the Security industry. All the major players have product and service aspects of their portfolio with significant overlap in any potential acquisition of GE to generate cost reduction synergies.

A CEO of a Security Systems Integrator recently asked Paramax’ Bob Coleman who has substantial experience in the Security Industry the following:

"This is very interesting. Is this something that will affect consolidation in systems integrators/distribution?"

“Most likely yes!

GE brings to UTC, TYCO, Honeywell and some others a large market share along with new products.  However, it also adds some products that are redundant with the buyers existing portfolio of products. Along with eliminating redundant products and transitioning customers to existing buyer products, there will be significant overlap in the distributor networks across the country. Tyco, UTC, Honeywell and some others all own distributors under various brands such as Tyco (ADT, Simplex/Grinnell), UTC (Kidde, CalProtection, Blackhawk, Chubb Security, Onity, Lennell, etc) and Honeywell (ADI, etc.). They will not only look to consolidate products but also the channels to the end users. Where they have existing owned distributor operations, the competitive distributor agreement may be eliminated or put at a disadvantage in pricing and product availability. In addition, many of the current GE distributors will most likely be looking to sell their business rather than risk losing the exit value, which will further reduce the distribution channel.

The transition of products will take a little time, as the buyer will want to be careful about changing over the installed customer base of systems. Most likely they will support existing systems, spare parts, etc but, work towards getting the customer to change to a new version of the system and selling only newer products to new customers.

The distribution changes will happen more quickly, I expect that the first 12 months after GE is bought will be fairly active after which the dust will start to settle and the focus will shift to the large corporations trying to take market share via competitive moves in various regions rather than through acquisitions.  We live in interesting times and timing is everything.”

Bob Coleman can be reached at rfc@paramaxcorp.com or 716-626-1200, ext 234

Paramax Corporation, [and subsidiary, Paramax Securities, LLC, FINRA member and SEC registered broker-dealer] is headquartered in Williamsville, NY, with additional offices in Rochester, NY, and Boston, MA. Paramax' team of 14 possesses diverse and experienced operating backgrounds in finance, accounting, law, engineering, and banking.

Paramax mainly sells middle market closely held businesses and business units of Fortune 500 companies. Its transactions range in size from $5 million to $500 million. Paramax has completed in excess of 200 transactions since 1992. The majority of its transactions are for divisions and companies located within the US, but they have completed numerous deals for both foreign and US based companies in which the business unit being sold was located outside of the US. Paramax is also affiliated with an international M&A advisory group [Globalscope].