The past year hasn’t been an easy one for anyone, let alone an alarm company trying to complete a growth capital round. Not only have many banks been hesitant to loan to alarm companies, but the COVID-19 pandemic has rocked the economy, bringing about a recession. 

Somehow, though, AMP Smart, a residential security and smart home services company based in American Fork, Utah, seemingly did the impossible, completing a growth capital investment round with Seacoast Capital and St. Cloud Capital. The investment, together with AMP’s renewed senior debt facility, provides AMP with a growth capital structure in excess of $60 million.

“The banking environment has been very challenging,” said Allen Bolen, AMP Smart CEO. “Luckily we had banks that were committed to our company and committed to bringing in more capital to grow the business, under the right terms. We had to be very precise in our modeling and also conservative to allow for unforeseen events such as the pandemic. All of the parties in the transaction were able to get comfortable with the projections, even with some fairly severe adjustments for scenarios that could develop as the economy adjusts.”

Robert Moe, CFO of AMP Smart, said AMP is a high growth company that consumes a lot of capital. Several years ago, the company knew it would at some point exceed the level of debt banks were comfortable providing, and that they were going to need to bring in some quasi-equity.

In 2019, they started looking for the right partner, and found Seacoast Capital in last August. 

“We spent a lot of time modeling out the growth picture for the company and the capital needs, talking about structure, and we were on track to have the transaction closed in Nov. 2019,” Moe said. “But around that time, the banks that lend to this industry began to pull back from the residential side of the business because of some unfortunate events related to some of the larger companies in the industry. These events raised questions regarding the methodology of company valuations, and that had a ripple effect for us, and began to delay our transaction.”

In order to address those questions and make the banks comfortable with their program, discussions spilled over into 2020. 

“And as we got into January and February, COVID-19 reared its head and created a lot of uncertainty for all of us,” Moe said. “It ended up causing a delay in the transaction, and we pretty much stood still for several months until we were able to have a better sense of what was happening and whether we would be able to put our sales reps in the field.”

AMP reps were able to go out into the field for the summer sales season, and Moe said the year remarkably turned out fairly normal besides its late start. After settling everyone’s anxieties about COVID-19’s potential impacts on the industry, the transaction was finally finished in the first week of June. 

Moe said the success of the transaction was in large part due to their strong bank choice. Since they had put AMP’s original financing together in 2017, the banks were already familiar with the company, its management and the business model. 

“We’ve spent a lot of time getting to know Seacoast and St. Cloud and they us, and they were quite committed to the home automation/ security alarm industry,” Moe said. “They’ve been in transactions in the industry before, and had a good sense of what the risks were, and their ability to take on those risks. We have good partners and they were all interested in finding a way to get this transaction completed. As we hit obstacles, all parties dug in to mitigate those risks . . . We believe the reason Seacoast and St. Cloud stayed at the table with us during all this turmoil was largely because they believed in the company’s management and the way we’re committed to executing the plan.”

AMP plans on continuing to do more of what it does best with the additional funds.

“We plan to use these funds to grow our RMR within the residential security space,” Bolen said. “SDM had us ranked as the No. 13 residential company in the latest release. We would definitely like to crack the top 10 in the future.”