ADT announced it entered into a definitive agreement to acquire Devcon Security for $148.5 million in cash. The acquisition includes approximately 117,000 customer sites with total recurring monthly revenue of approximately $3.6 million. The transaction is expected to close in early August.
Devcon Security, headquartered in Hollywood, Fla., is currently ranked No. 20 in the SDM 100. The company recently went through a period of accelerated growth, followed by quick changes in leadership. Rumors that Devcon was up for sale began gathering steam earlier this year as its owner since 2009, Golden Gate Capital began to monetize its other security industry investment, Pinnacle Security.
Naren Gursahaney, ADT’s chief executive officer, said, “We are … very pleased to announce the acquisition of Devcon Security, a quality company that we’ve admired as a competitor. In addition to the solid characteristics of the Devcon customer base, we are excited to add Devcon Security’s seasoned sales force and distribution capabilities as well as their highly competent management and operating teams. We operate in a highly fragmented industry and over time expect to see additional M&A opportunities, like Devcon, that could represent value added enhancements to our organic growth.”
Devcon stated, “We are excited to share the news that Devcon Security has entered into a definitive agreement to be acquired by ADT. We are thrilled to join the ADT family – one of the most well-known and trusted brands in the security industry today.”
In conjunction with announcing this sale, ADT reported its Third Quarter 2013 Results, including 4.2 percent RMR growth driven primarily by an increase in ending average revenue per customer, which rose to $40.08. Non-recurring revenue declined 14.8 percent as the company’s mix of newly installed systems continues to shift toward more ADT-owned systems, increasing deferred revenue and reducing current period installation revenue. Total revenue of $833 million increased 2.3 percent compared to the third quarter of 2012.
“Our results for the quarter reflect solid execution on our growth and cost control initiatives. We continued to make significant progress in expanding sales of ADT Pulse with the trends in take rates demonstrating the broad appeal of the Pulse product set across all of our sales channels,”
Regarding the company’s strategy, he said, “We recently completed our annual strategic planning process. Our three-year strategic plan focuses on investing to grow our core business, increasing operating efficiency, and pursuing accretive acquisitions to complement organic growth. We believe optimizing our capital structure will help us achieve our strategic goals, and expect to target a leverage ratio of 3.0 times debt to EBITDA over time. We expect to use proceeds from incremental leverage to pursue a flexible, balanced capital allocation plan, including investing in organic growth, completing acquisitions, and returning excess cash to shareholders in the form of both dividends and share buybacks.”