Security

Direct New Investment in the Physical Security Industry Fell in 2016

Our recent Report on the Physical Security industry identified 9 transactions by venture capital and notable security companies investing some $96.3m into physical security companies. Venture Capitalists have invested an average of $275m per annum in the physical security industry over the previous 4 years, so it’s rather disappointing to see it fall to $96 million in 2016. Venture capital investment in the USA marginally declined in 2016 but this is unlikely to have been the reason for the significant fall in investment in the physical security industry. We can only assume that venture capital companies failed to find the opportunities to invest in the right prospects for them as the industry becomes more mature. However as the report shows investment through merger and acquisition reached an all time high in 2016 with some heavy premiums paid bringing more funds into the physical security business. The vast majority of the venture capitalists listed in our […]

Stay ahead of the pack

with the latest independent smart building research and thought leadership.

Have an account? Login

Subscribe Now for just $200 per year per user (just $17 USD per month) for Access to Quality Independent Smart Building Research & Analysis!

What Exactly Do you Get?

  • Access to Website Articles and Notes. Unlimited Access to the Library of over 1,700 Articles Spanning 10 Years.
  • 10% discount on ALL Memoori Research reports for Subscribers! So if you only buy ONE report you will get your subscription fee back!
  • Industry-leading Analysis Every Week, Direct to your Inbox.
  • AND Cancel at any time
Subscribe Now

Our recent Report on the Physical Security industry identified 9 transactions by venture capital and notable security companies investing some $96.3m into physical security companies.

Venture Capitalists have invested an average of $275m per annum in the physical security industry over the previous 4 years, so it’s rather disappointing to see it fall to $96 million in 2016.

Venture capital investment in the USA marginally declined in 2016 but this is unlikely to have been the reason for the significant fall in investment in the physical security industry. We can only assume that venture capital companies failed to find the opportunities to invest in the right prospects for them as the industry becomes more mature. However as the report shows investment through merger and acquisition reached an all time high in 2016 with some heavy premiums paid bringing more funds into the physical security business.

The vast majority of the venture capitalists listed in our report are US based and indeed so are the companies they are supporting. The two epicenters in the world for leading edge technology in IT and electronics are located in California and Boston. This is the reason that many of the venture capitalists are also located there. These are the hot beds of research and development into electronics and digital science including computers, communications and software, which are the technologies that are driving the development of new and better physical security products.

The Software portion of physical security continued to receive the highest level of funding of all areas; getting $8.7 billion across 379 deals, a 70% increase in dollars despite a 4% decrease in deals. Six of the 11 megadeals (investments of $100 million or more) were in the Software industry.

The Software industry has held the top spot for dollars invested among all industries for 27 straight quarters according to Global MoneyTree Reports. Software particularly in the Video Surveillance business is one of the more attractive growth areas, so it is surprising that they did not find more opportunities to invest in 2016. Finance is available but there is strong competition for it from hitech businesses; But the physical security industry has a strong case to at least retain its share if not increase its share of the financial cake in 2017.

Whilst investment through venture capital companies declined in 2016, we have seen substantial growth in debt and term loans. Hikvision has received two debt and term loans totaling $6 billion from two different Chinese state owned banks and another major Chinese company Dahua has authorized $760 million in commercial bonds.

A significant proportion of this is to finance their expansion into North America and Europe. In our 2012 financial year we identified 13 arrangements, which brought in $8.537 billion of debt financing. Whilst a significant proportion of this was renegotiating existing loans the majority covered new loans, with Tyco International issuing $2.5 billion of bonds and United Technologies extending their debt by $3.5 billion but very little of the latter would have been earmarked for their security business.

Since 2013 activity in organizing new debt finance arrangements declined and in the following 2 years it has average around $250 million. This is not surprising as the financial strength of the industry has improved during the last 4 years with growth in revenues and profits and many companies now have strong cash reserves. The rapid upturn this year would suggest that Chinese companies have prepared themselves to see out an aggressive campaign of winning market share by lowering prices.

The data in this article was taken from Memoori’s 8th edition of their Annual Report The Physical Security Business 2016 to 2021. It covers the last quarter of 2015 through to the end of the third quarter of 2016.

[contact-form-7 id="3204" title="memoori-newsletter"]

Most Popular Articles

Net Zero Buildings Timber IHS
Energy

Net Zero Buildings Explored: International House Sydney, Australia

As the first timber structure of its scale in Australia, International House Sydney (IHS) occupies an important position in the nation’s architectural history. Completed in mid-2017, IHS gained a 6 Star Green Star for office design and achieved As Built (v3) rating, alongside many other awards for design, operation, and especially embodied carbon. The six-story […]

Subscribe to the Newsletter & get all our Articles & Research Delivered Straight to your Inbox.

Please enter a valid email

Please enter your name

Please enter company name

By signing up you agree to our privacy policy