Buying in the Alarm Industry

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Barry Epstein
President
Vertex Capital
[email protected]
972-740-2740
SedonaOffice 2013 
Vertex Capital
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Advisory services specializing in the Life Safety
sector
Buy and sell side advisory services across the
country
Representation of all types of buyers: local,
regional, private equity backed, public
Acquisitions throughout the Life Safety arena,
including alarms, integrators, guards, fire/fire
sprinkler, medical alert
SedonaOffice 2013 
Vertex Capital
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Why do acquisitions?
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Types of buyers and sellers in today’s market
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What the seller needs to have and wants to know
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Ingredients of the letter of intent
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Financing the deal
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Looking at a seller’s actual bids
SedonaOffice 2013 
Vertex Capital
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Faster growth
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More markets= more of a referral base
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Pick up strong sales reps and techs
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Smoother revenue stream
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Replace attrition- buying an SDM 50 to stay
even
SedonaOffice 2013 
Vertex Capital
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Local with $50k in mrr
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Regional with $600k in mrr
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National account buyer with $4mm in mrr
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National company buyer with $8mm in mrr
SedonaOffice 2013 
Vertex Capital
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Relish contracted recurring revenue
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Good opportunity for growth through acquisition
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Low market penetration vs. other recurring
revenue (TV, internet, phone)
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Very liquid market = easy exit
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Lenders throwing money at large borrowers
SedonaOffice 2013 
Vertex Capital
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Dealer with $6,000 in mrr (contracts/mixed
phone line)
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Dealer with $32,000 in mrr (good contracts,
c corp)
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Dealer with $70k in mrr (valuation
expectation)
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Dealer with $180k in mrr (offices, own
central, kids in business)
SedonaOffice 2013 
Vertex Capital
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Signed Contracts
Own The Phone Lines
Attrition Calculation (static pool)
Financial Statements with Adjusted EBITDA
Knowledge of Tax Implications
Legal Representation
Sell Side Representation (State to State)
Multiple Offers
SedonaOffice 2013 
Vertex Capital
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What’s the multiple?
Does contract term matter?
Is there a minimum MRR?
Will the buyer keep my people? Rich man,
poor men
Do I have a shot at the holdback?
Is the multiple the price or + b/s items?
Does the buyer have the money?
SedonaOffice 2013 
Vertex Capital
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If wholesale, let your customers know
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Put ad in state association newsletter
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Put the word out at the association meetings
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Don’t assume he won’t sell to you (2 old rams who hadn’t
spoken in 12 years)
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Look for orphans (Large buyers/small markets too much trouble)
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Build a pipeline (They may sell in 4 years)
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ASK CONNECTORS
SedonaOffice 2013 
Vertex Capital
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Nonbinding
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Multiple
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Number of accounts
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Amount of recurring revenue
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LOI expiration date (ideally less than 4 years!)
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Freeze period
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Stock purchase vs asset purchase
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Accounts only or assets (a/r, inv, veh, fix, lease)
SedonaOffice 2013 
Vertex Capital
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Buying 1,000 accounts at $25 per month=
$25,000 in mrr.
Purchase price is 33x, 10% held back for one
year.
$25,000 * 33x = $825,000 * .9 = $742,500.
Bank lends 22x or $550,000. Buyer comes up
with balance of $192,500 or puts up more mrr to
the bank ($33,700 total= no cash upfront)
SedonaOffice 2013 
Vertex Capital
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Attrition has settled down and will remain stable
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Number of buyers on increase as banks keep lending
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No killer app in sight to destroy monitoring revenue
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Utilities trying again to gain tremendous market
share
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Multiples will remain strong as private equity firms
have huge amounts of money on the sideline that
must be put to use
SedonaOffice 2013 
Vertex Capital
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