The last 6 months have shown that security suppliers are working hard on all those strategies that can deliver new business opportunities. This has ranged from buying companies and assets, to forming alliances with other suppliers and getting new finance to implement product development and marketing and promotion. Our monthly reports show that all these activities are well up on the same period in 2009. It is a real credit to this industry that despite some of the worst trading conditions and tight money supply in the last ten years, it has performed so well.

Nine merger and acquisition transactions in June were more than double last month and 50% up on the same period in 2009. Consolidation activity has regained its momentum this month and the aggregate for the first 6 months of 2010 is still ahead on the same period last year. However the A&E; Business which shares with Security common markets is still down on 2009, so by comparison the security industry is performing well here.

There are 2 mergers of note this month which stand out for different reasons. Nice Systems because of completing 4 strategic buys in 10 months with convergence with the IT Business Enterprise being a major driver and the sale of Protection One for $828m which at a very healthy exit price confirms that nothing is being given away yet.

Nice Systems continued to accelerate its acquisition programme with the purchase of Eglue Software Ltd. This is the fourth acquisition that Nice have made in the last 10 months and all are strategic buys to strengthen and enhance their security and real time decision and guidance offerings so that they can offer end to end solutions to converge with the business enterprise. The previous three acquired companies are based in Israel and Eglue in the US, but were initially founded in Israel. Could Verint be the next target? They also offer IP Video Surveillance that focuses on providing end to end solutions to particular vertical markets. There was a time some years ago when Verint had a serious interest in acquiring Nice so this would really be a twist in the tale. The other alternative is for IBM to resume their interest, which was rumoured a year ago and they would only buy if they could see this enhancing their capability to deliver total solutions.

The Protection One acquisition whilst much more motivated by the opportunity to drive up profit through scale and efficiency also will seek to develop integration opportunities through Software as a Service (SaaS) to their existing clients. This marks GTCR’s third collaboration with security industry expert Tim Whall, who previously partnered with GTCR on its successful investments in Cambridge Protection Industries ("Cambridge") and HSM Electronic Protection Services, Inc. ("HSM"). P-One is the third largest provider of electronic security monitoring services in the U.S. based on recurring monthly revenues ("RMR") as reported in SDM Magazine. GTCR paid $828m making an exit multiple on sales for Protection One of 2.23. They must believe that traditional cash cow alarm monitoring companies offer significant opportunities to develop much more attractive business opportunities. No doubt their major rivals Stanley and Tyco both active buyers are similarly motivated.

Alliance activity continues at a brisk pace and this month was no exception with some 10 arrangements being confirmed. Alliance is driven by the need to develop new business opportunities through sharing or combining technology and markets. However this is now extending to open up new opportunities delivered through integration and convergence. A good example of this was the announcement this month of a strategic partnership between CNL and ESRI (UK). The former is a specialist PISM software supplier and the later a software manufacturer providing the backbone for the world’s mapping and spatial analysis. The combination of these technologies will allow ESRI customers to bring their entire security estate into one system and CNL customers to leverage greater efficiencies and significantly improve their operations.

Interoperability may no longer be enough according to Steve Titch of Security Squared. Vendors of IP-based surveillance cameras and video management systems are upping the ante on integration certification, providing integrators and users with documented validation of more comprehensive functional integrity between their respective platforms. As IP drives more user interest in assembling best-of-breed solutions, and as standards from groups such as the Open Network Video Interface Forum (ONVIF) and the Physical Security Interoperability Alliance (PSIA) are incorporated into commercial products, vendors find they need a stronger differentiator beyond basic plug and play.

The security industry is in good shape but as always when a market goes through traumas and new technology is introduced there will be losers as well as winners. IP is the arbiter here and those who do not embrace it will not survive for a very significant and growing share of the security market will depend upon convergence with all aspects of the business enterprise.