Newsletter Spring 2021

The Services we offer:

Harding Security has expanded its services over the years. All our services below are now being offered to owners of alarm, integration,fire, guard and distribution businesses across Canada including Quebec.

1. Selling your company? If you have decided to sell and want help all the way through the process, we can look after you. This is our bread and butter.
2. Selling your company and already have a buyer in mind? We will provide an expert opinion on the Buyer, their offer, and help you close the deal.
3. Need a valuation done? We are performing more and more valuations every year. Although we are not Chartered Business Valuators, we are less expensive and more accurate when valuing the recurring monthly revenue in security companies. Also, unlike most valuations firms, we have the experience of actually having to close deals on our valuations.
4. Expert Opinion We have been retained to provide an expert opinion on security industry valuation issues.
5. Looking for a company to buy? We can help you perform the search and close the deal. We charge a small monthly retainer to perform the search and a success fee if we close a deal.
6. Looking to buy and already have a company in mind? We are doing more and more of this kind of work. We can help you value the target, and structure and close the deal. We can also provide many of the required forms.
7. You are a Buyer looking for ongoing buying opportunities? In certain cases, we will enter into a Buyer’s Agreement with a big buyer to exclusively bring them deals. .
8. Looking for acquisition financing? In certain circumstances, we can help a dealer obtain financing for acquisitions of mid to large sized alarm companies.
9. Designing or redesigning an Authorized Dealer Program? We can help you design or re-design an authorized dealer program. We also help dealers choose the right program for them and negotiate their particular deal.
10. Post acquisition Investment Advice? This is particularly useful to Sellers after they have sold – how to invest their purchase price. We have a relationship with a Canadian chartered bank which can offer you different types of investment advice.

M & A Activity in the Canadian Security Industry under Covid 19

As I write this newsletter, the 3rd wave of the coronavirus is hitting Canada hard. The restrictions put in place recently will affect anyone in the industry needing to get into homes or offices to do installation or service work. And I have to think it may adversely affect the attrition on monitored accounts.

It seems odd to be talking about doing acquisition deals in such an environment but countering this shut down is the fact that the stock market is at an all-time high, unemployment numbers are coming down, Canadians are saving more than they ever have and the number of homes being sold in the midst of the pandemic has increased enormously. So there are good things happening.

The economy continues to tick along. It is noteworthy that M & A activity across all industries in Canada ended 2020 at about the same level as in 2019 which when you think about it is amazing. Buyers, sellers and their advisors are simply working around the pandemic to get deals done. All these parties are using ZOOM to complete deals digitally. Quite frankly I think using Zoom instead of actually travelling to the site makes a huge amount of sense. It saves time and money.

There are other factors at work allowing deals to happen in Canada including in the security industry. Firstly there is pent up demand from the pandemic back in Mar- July 2020 when no deals were done. Secondly Interest rates are at an all- time low. We have seen what this does to the real estate market. Thirdly a factor I have seen in my own business is that the baby boom generation still continues to retire selling their businesses in the process. In addition some buyers are out there looking for deals. Finally- and I have seen this too- there is a crazy amount of Private Equity money on the sidelines looking for a home. Thank God for PE money. As an M & A advisor, I see that PE firms are stepping up where the bigger strategic players in the integration and fire space are not.

Deals are being done in the security industry in Canada. I myself am working on several alarm account deals- more than normal. I also recently helped Armstrong’s Communications buy Surveillance Plus a ULC approved station in Montreal, the fifth monitoring station deal I have been involved in. In fact I am looking for another monitoring station for another client. I know that certain buyers in the alarm account space are very busy. We just saw Onyx Fire one of the largest fire service companies in the GTA, if not Ontario get bought by a PE firm.

Some owners are holding off putting their company on the market because of the virus. They could be worried they won’t get the best price with the virus around or it could be that their business was affected by the virus and they want to get 12 months of good financial results behind them before they sell. This makes sense.

Is this a good time to Sell?

This is always a tough question to answer. As mentioned above there are certain “macro” factors in place that make this a good time to sell- not many properties on the market, very low interest rates and lots of PE money around.

But you personally must be ready to sell. You should plan your exit by addressing some or all of the following:

• Are you emotionally ready to sell? You will know
• Do you have a game plan in place for after you sell?
• Have you had your company valued? If not we can do this for you. We understand the value of recurring monthly revenue better than most.
• Are you planning to sell to family, management or a third party? We deal mostly with sales to third party buyers.
• Have you talked to your accountant about the tax implications of a deal?
• Have you thought about hiring an M & A advisor to help you sell? They more than make up for their fee.

Also your company must be ready to sell:

• Do you have 3 years of financials and tax returns ready for the buyer to review?
• Can your company show at least two years of solid financial results and a good forecast for the future? This is critical!
• Do you have a good management team in place that does not count on you? This is not so important if you are selling alarm accounts.
• Is your customer base such that no one customer counts for more than 10-15% of your annual revenue?

If you have addressed all of these issues immediately above and the answers come back positive, then there is no reason why this is not a good time to sell.

Let me add some comments about specific sectors of the security industry in regards to selling right now:

• In my recent experience days, very few alarm dealers are growing their account bases. I suggest checking your account base total versus this time last year. With the competition from the telcos (Telus in particular), most dealers are having to “invest” in an installation to get a new account. Most dealers are losing more accounts than they are putting on. My sense is this is not going to improve anytime soon. If I owned accounts at the very least I would be getting my base ready to sell.
• Based on the calls I am getting from buyers, both fire and guard companies are very much in demand these days. If you fit into either category and are looking to sell, I encourage you to call me.

Why use a broker and why a “specialized” one at that?

Some owners attempt to sell their business on their own without using a broker. As long as you are using a broker that knows your industry and has closed deals, you almost always will more than pay for the broker’s fee in what you get back in better terms, less headaches, a better chance of getting the deal closed and closed faster than without a broker. All of these advantages are backed up with stats.

Moreover I have never seen a deal done without a broker where the owner did not “leave something substantial on the table”. This is above and beyond the time away from running the business to do the deal. You would be surprised at the basic selling process mistakes that even experienced security dealers can make when attempting to sell their business on their own.

Secondly people wonder why I try to focus on just one industry. The answer is to really add value to any sales process, there are 2 things any broker has to bring to the table. First he or she needs to be able to value the company they are selling properly. This only comes with years of experience of valuing companies in the same field. Secondly a good M & A advisor should know some or most of the better buyers in that industry. Again something that is impossible to acquire if you try to cater to many different industries.

Recently Completed Deals

As of April 2021

• SOLD – I represented Delta Security, a GTA-based guard company specializing in loss prevention doing approx. $3.2 million in annual revenue, in selling it to I Guard 360, also based in the GTA.
• SOLD – I represented Soteria Inc, a small Red Deer AB based alarm company, in selling it to Liberty Security based in Edmonton, AB
• BOUGHT – I represented Armstrong Communications, a Maritime based monitoring company, in its efforts to buy Surveillance Plus, a Montreal based monitoring station.

HSSI is currently working on the following

As of April 2021

• An Ontario based alarm account deal involving 2600 accounts. A Letter of Intent has been signed to sell just the assets.
• Another Ontario based alarm dealer with 1400 accounts who is selling the shares of his company. Again a Letter of Intent has been signed.
• A GTA- based alarm company with 1200 alarm accounts. Again just the accounts are being sold. A Letter of Intent has been signed.
• A blocks of 800 alarm accounts based in Alberta.

Businesses for SALE / Looking to BUY

As of April 2021

• A Security Company in north western Ontario with a sizable block of monitored accounts along with integrated systems capability is For Sale.
• Looking to buy a ULC approved monitoring station ideally based in the GTA or close by. Could come with wholesale and retail accounts

We have had several owners contact us about selling but we don’t have a firm commitment yet. Check back with us in a month or so.

Please contact us at 416-925-7474 or at victor@hardingsecurity.ca to discuss selling your business.

What else you should know about Harding Security

1. We are a fully independent M & A Advisory firm based in Toronto, Canada which has been in business now for 12 years.
2. Harding Security’s principal, Victor Harding, has been in the security industry in Canada for over 25 years. He is a CA by training and has had lots of large and small company experience before getting into the security industry.
3. We are focused solely on the security industry – alarm, integration, fire and guard companies..
4. We work on both the buy and sell side. We also do valuations of security companies.
5. We are the only M & A advisory firm doing deals across Canada in all parts of the security industry.
6. We have extensive contacts in all parts of the security industry.
7. We pride ourselves on getting the deal done. As an intermediary we have had a high closing ratio on deals.
8. Harding Security has recently aligned itself with a larger M & A Advisory firm, Norton McMullen Corporate Finance, to help do larger deals in the industry..

We suggest you go to our website at www.hardingsecurity.ca or visit our LinkedIn page at https://www.linkedin.com/in/cmvharding to learn more.

Harding Security stays in touch with the security market

• We are members of the following security related organizations – Canasa (Canadian Security Association), CFAA (Canadian Fire Alarm Association), CASA (Canadian Automatic Sprinkler Association), ASIS International, ACG (Association for Corporate Growth) and the M & A Club . We constantly attend seminars put on by many of these organizations.
• We try to attend at least 2 of the major Annual Trade Shows in Canada and the US each year including the various regional Canasa Shows, ISC West or East, ESX or ASIS.
• We usually attend at least 2 of the Annual Security Conferences each year including Barnes-Buchanan, Security New Ground, the Imperial Capital Investment Conference or SPT’s Security Summit.
• We subscribe to most of the major security magazines including Security System News, SDM, Security Sales and Integration and SPT News.
• We write a regular bi-monthly article for SPT News.

If you are getting this newsletter . . . .

You are receiving this newsletter because you are in a senior position of a security company in Canada or I have talked to you or we have conducted business in the past. Alternatively, we could have Linked in together or, like me, you are a member of one of the following organizations: Canasa, CFAA, CASA, ESA or ASIS.

If you would like this newsletter delivered to another email address or if there is someone else in your organization who should be receiving this newsletter, please email me at victor@hardingsecurity.ca.

If you are a seller or buyer of a security company or wish to have your business valued . . . please contact Victor Harding at (416) 925-7474 or via email: victor@hardingsecurity.ca