TrendSecurity M&A activity breaks records

As we reported yesterday, the value of transactions in the security sector during September was the highest ever recorded for a single month during the last three years. cquisition transactions in September were 25 percent up on the same period in 2009 (which was the highest number recorded in that year).

Allan McHale, director of Memoori, writes that consolidation activity for the first nine months of this year far exceeds the same period in 2009. “It may well be that 2010 will be setting a new record,” he notes.

Most of the majors (including Honeywell, Schneider, Siemens, Johnson Controls, Bosch, and UTC) have yet to seal a deal this year. He expects that the pace of consolidation experienced in the third quarter will continue into the last quarter of 2010.

Here are highlights from his report (we dealt with the activity in the biometric sector yesterday; see

“Biometrics M&A activity reaches new heights,” 9 November 2010 HSNW).

UTC: plans to grow through acquisition

UTC has made it known that it intends to grow through acquisition. It is now almost a year since its mega purchase of GE’s Fire & Security Division (“United Technologies to buy GE Security,” 16 November 2009 HSNW). The company is the strongest player in the fire detection and prevention market, so maybe it is time to balance the business with a big security buy?

“I would think the company’s preference will be for an installer integrator rather than a product manufacturer,” McHale writes.

UTC may follow Siemens’ lead, though, and buy a company focused on providing holistic solutions in a particular vertical market.

Siemens on the purchasing trail

Siemens has just purchased Republic Intelligent Transportation Services (Republic ITS). Headquartered in Novato, California, Republic ITS will become part of the “complete transportation” business of the mobility division of Siemens Industry, Inc, and be closely aligned with its intelligent traffic solutions business.

With the completion of this purchase, Siemens is making a commitment to strengthen its position in the transportation solutions, service and maintenance business while at the same time providing a valuable opportunity to grow its security systems business.

“That said, the rumor that first surfaced about eighteen months ago suggesting Siemens was looking for a buyer for its security products business has now resurfaced. It is interesting to note that Siemens has not acquired any security companies for over two years,” McHale notes.

Hewlett-Packard’s big move

The biggest single deal of late has been the Hewlett-Packard (HP) buy-out of security software company ArcSight for $1.5 billion (“HP to buy security software company ArcSight for $1.5 billion,” 15 September 2010 HSNW).

McHale notes that his first reaction to this acquisition was that it had little to do with the physical electronic security business. This company’s Enterprise Security Manager solution, however, is to IT systems what physical security information management systems are to sensors, access control, digital surveillance and mass notifications systems, etc.

ArcSight has exhibited at a number of security exhibitions this year, in turn showing Enterprise Security Manager’s capabilities in using data about physical events.

As Security Squared’s Steve Titch pointed out, ArcSight understands that cybersecurity and fraud prevention tactics are more effective when they are tied to data about real world events: who is in the building, what is happening with that sensor, what is the surveillance device seeing, and does all of that data mesh with activities that Enterprise Security Manager is logging in cyber space?

“If that philosophy persists when ArcSight is digested by HP, what we’d then have is a major IT vendor with an IT/SIEM-coloured perspective about how physical event data affects cyber security measures,” McHale writes. On that basis, it will be interesting to watch what HP makes of this deal.

How will the market develop

These three major acquisitions — UTC acquiring GE’s Fire & Security Division; Siemens acquiring Republic Intelligent Transportation Services; and HP acquiring ArcSight — tell us more about how the future shape of our market will develop. McHale writes:

It’s fair to say that HP/ArcSight and their IT competitors could ultimately influence and or be major buyers of physical electronic security systems.

[In an earlier article, “Where Are the Growth Opportunities in the Security Sector?”] I discussed the influence of IP and the network on the security business, and showed that the IT enterprise and communications channel was being courted by both security manufacturers and their clients such that they could be involved in providing holistic solutions.

Together with Cisco and IBM’s activity in the market, this latest activity confirms that trend. Expect this to extend to more acquisitions of security companies by IT and communications companies in the near future.