Resideo Technologies (NYSE: REZI) made a momentous move in the smart living and security market by acquiring Snap One Holdings Corp. (Nasdaq: SNPO), a deal totaling $1.4 billion that caught many security industry stakeholders by surprise.   

Resideo is a significant player in the industry with a valuation of $6.2 billion. Specializing primarily in security products, the company also provides a range of adjacent solutions including energy management and water management, networking, wire and cable, and smart home solutions. Resideo’s ADI Global Distribution brand represents 57.2 percent of its revenues, while the manufacturing division contributes about 42.8 percent of revenues. 

The official announcement stated the “transaction will combine ADI’s strong position in security products distribution and Snap One’s complementary capabilities in the smart living market and innovative Control4 technology platforms, which is expected to drive increased value for integrators and financial returns.” 

Kirk MacDowell, founder and president of MacGuard Security Advisors, points to the combined entities’ 240 warehouse locations in the United States as significant driver behind the transaction. ADI holds the lion’s share with 195 branches.  

“Let’s look at this from a Resideo point of view. This is all about ‘land and expand.’ Meaning, you get dealers and integrators in the door and you sell more stuff,” MacDowell said. “It’s an upsell opportunity.” 

MacDowell views the joining of the two companies as solving a buying dilemma he describes as a “bifurcation of purchasing power.” He explains a scenario in which a dealer shops at ADI to purchase items 1 through 7, but they then have to go to Snap One to get items 8, 9 and 10 to complete their order.  

“Could they have gotten those items through ADI? Maybe. But ADI probably didn’t have expertise in the A/V space that Snap One does,” MacDowell said. “So, by combining these together it really is one hand to shake. … Snap One didn’t have all of the security and intrusion products and cameras that they needed. But ADI didn’t have all of the structured wiring and the big A/V stuff that it needed. That’s why, with the two combined, that land and expand is probably the ultimate goal.” 

In making the deal, Resideo and Snap One may also both be exploring avenues to rejuvenate their growth trajectory, following a period of limited expansion last year. Based on the most recent SEC 10-K filing for 2023, Resideo reported a slight decline in revenues, dropping 2 percent from $6.4 billion in 2022 to $6.2 billion. Similarly, the company’s net income decreased by 25.8 percent, falling to $210 million compared to $283 million in the previous year. 

In its latest fiscal year, Snap One similarly faced stagnation in its financial performance. Net sales amounted to $1.1 billion, marking a decrease of 5.6 percent compared to the previous fiscal year’s net sales of $1.1 billion. Additionally, the company reported a net loss of $21.4 million, significantly surpassing the net loss of $8.7 million recorded in the prior year. 

For John Loud, founder and president of LOUD Security — a long-time Resideo dealer partner who also was a Snap One customer in the early 2000s — news of the acquisition came as a “great surprise.” ADI’s ability to sell more of its security products through Snap One integrators who excel at custom integration will be key, he said. 

“For ADI it’s such a great additional vertical that they’ve worked on for years to get into. But obviously now they’re able to buy their way into it and gain that customer,” he continued. “When you look at the ADI upside growth within the residential and commercial space, that’s where they’ve been the whole time. The acquisition is a way for them to propel [custom integration] and higher-end automation for sure.” 

One way ADI is likely to promote cross growth to Snap One customers is through its highly respected systems design group, Loud said. Staffed by industry experts, the free service provides installers with product recommendations and comparisons for their projects, among other support such as best practices to ensure successful system integrations. 

“There are a lot of synergies there because it is all low-voltage work. I think you’re going to see some of the traditional ADI customers begin to explore these automation and A/V areas because they can partner with the same supply house,” Loud said. “Likewise, there’s a lot of cross growth that a typical Snap One customer certainly could start exploring through ADI’s leadership of helping dealers understand the products and services.” 

During an investor conference call to discuss the acquisition, Resideo executives said they identified $75 million in synergies over the next three years, including real estate consolidation and overhead efficiencies.  

“The synergies and the complements are really big. They’re going to complement each other really great because they have so much overlap and in geography,” said Peter Giacalone, president of Giacalone Associates, an independent security consulting firm. “Snap One owns a lot of the key brands that they distribute. Control4 and Clare Controls are two of the big ones. It’s such a great expansion for ADI. Resideo is saying they’re going to get $75 million by year three in synergies, I have no cause for doubt.” 

One question SDM spoke to sources about for this story was whether or not the Snap One acquisition might help Resideo innovate faster and bring new products to market more expeditiously. The company, formed in 2018 as a spin-off from Honeywell, has been chided for decades by many of its dealer partners for not keeping pace with competing manufacturers and disruptive new entrants.  

In Giacalone’s view the acquisition represents “tremendous opportunity” for Resideo on the manufacturing and platform side of the business. Snap One gives them the ability to pursue “some unbelievable collaborations and integrations with a variety of products,” he said. “Snap One is much more than a distributor.” 

By example, Snap One’s ClareOne wireless security and smart home panel is billed as the world’s first professionally installed controller that unifies full-featured home automation and security monitoring in a single touchscreen panel. The company’s Control4 smart home system allows users to automate and control connected devices, such as lighting, audio, video, climate control, intercom and security. The system has an interoperable ecosystem of nearly 14,000 third-party products. 

“I can’t predict the future, but what I think they’ll try to do is take some of these progressive brands — it might be Control4 or one of the other brands — and now try to bring a variety of options for collaboration between different brands, different products, different platforms,” Giacalone said. “It will make Resideo look more sexy, and maybe on the automation side it will bring more security to the lifestyle services.” 

MacDowell doesn’t see the acquisition as improving Resideo’s time to market, but he does expect it to enhance services through both entities. 

“The Total Connect platform has been fairly robust but somewhat long in the tooth. And so much so that you now have a cadre of Resideo dealers who like the intrusion panel but they use the Alarm.com backend [via a security enhancement module developed by Alarm.com],” he said. “Therefore, they are still selling product, but they’re losing some of that backend because integrators are moving a little bit more toward Alarm.com.” 

MacDowell suggested Resideo is now faced with making a command decision: Do they put the pedal to the metal on the existing Total Connect platform or do they explore some type of hybrid, such as overlaying Control4 on top of Total Connect. 

“I think that’s what you’re going see. I think you’re going to see that Control4 platform overlaid onto the Resideo platform to give them more opportunities in the home for locks, lights, thermostats and shade control, which works very well on the Control4 platform,” he said.  

Giacalone added, “The industry in the last 10-15 years is now innovating at such a rapid pace. Resideo, like anyone else, has the desire and foresight to do it but it seems like a lot of the smaller, more nimble companies are outpacing them. This could give them a real leg up because they have so many new and aggressive technologies under their roof now.” 

Loud also said the upside in the combined entities is far more significant in products and services than increasing Resideo’s time to market. “They’re not doing great numbers today. But now they are going to be able to cross pollinate all of those products over to companies like us that used to do A/V but haven’t been,” he said. 

Where Resideo enjoys a deep presence in security and HVAC, Snap One fills a void, Loud continued. “Resideo has had relatively small penetration in the high-end custom and A/V automation space. They deal with a lot of light automation in the security space, but a Snap One customer has a more enhanced focus. It’s like having a commercial integrator that doesn’t focus on RMR but does largescale camera, access, fire and burg,” he explained. “These are high-end integrators that are in the A/V space that are doing the boardrooms, are doing major corporation stuff as well as significantly sized homes. It is the third leg of that low-voltage stool if you will.”