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Recapping the Last 12 Months in the Security Industry
As we turn our calendars to 2019 and settle into the New Year, it’s a good time to reflect on the major trends that took hold of the security industry last year. A common thread that spanned the industry during 2018 was the topic of convergence. Mergers and acquisitions dominated headlines as firms took steps to become more competitive in a growing market. Traditional guarding firms acquired tech startups, and industry titans increased their market share by merging with other major players. As a result, we’re starting 2019 with fewer companies, but the ones that remain are bigger than ever before.
From guarding companies to security solutions providers
Gone are the days of security firms that identify as guarding companies. In order to meet the demands of the ever-changing industry, security companies are transitioning to ‘security solutions providers.’ The fastest way for companies to do make this change is to acquire tech companies capable of providing an innovative edge that streamlines traditional guarding services. 2018 saw an unprecedented number of transitions to this service style.
In 2015, Swedish security company, Securitas, started the trend of acquiring tech-based security firms by purchasing Diebold’s electronic security business for $350M. That foresight proved to be a step in the right direction, and a lot of the physical security industry has since followed suit. From January to September 2018, 2,538 deals were completed in the security industry, and a lot of them were based on acquiring the technology needed to offer clients fully integrated security solutions.
The success of that initial acquisition has spurred Securitas to continue making more strategic purchases. In January 2018, they acquired three more electronic security tech companies, which helped strengthen Securitas’ presence in key geographic regions, while also enhancing their electronic security services.
Big players expand through strategic mergers
The other side of the 2018 M&A equation saw several of the top players merge with other large companies to increase their share of the market. The result is that there are now fewer security service providers overall, and almost 60% of the market is owned by just three companies: Allied Universal, Securitas, and G4S. Former big players, Guardsmark, ACSS, FJC and USSA, have all been acquired by other firms within the last five years. The impact of less competition in the industry may mean that companies can command higher prices from clients.
Allied Universal has been one of the most aggressive companies to move up the ladder through strategic acquisitions. They’ve been on a mission to double revenue by 2022 and have been acquiring major firms, including US Security Associates in 2018, to meet that target. Allied is growing three times faster than the annual 4% industry growth rate and could be in initial public offering territory.
What to expect in 2019
Mergers and acquisitions will undoubtedly continue in 2019, as security companies look to find new ways to meet aggressive targets. On top of that, ongoing cyber threats, workplace violence issues, and weak active shooter protocols will continue to plague key industries. New challenges to troubleshoot will likely include information integrity and blockchain-powered cryptojacking, which is apparent through the glut in global cybersecurity jobs that companies are struggling to fill.
One step towards defending against risks includes the adaptation of Enterprise Security Risk Management (ESRM) in corporate culture. Fortunately, previous efforts to get companies on board with this initiative are finally paying off, as building corporate ESRM capacity was the focus of many ASIS International presentations at the 2018 GSX. This shift towards proactive risk management will undoubtedly result in fewer security breaches overall.
Getting businesses invested in their own security protocols is another way we’re seeing positive signs of convergence in the industry, which is increasingly less divided. Traditional services are being integrated with digital innovations, companies are partnering up to reach new synergistic potential, and security is becoming a part of your average employee’s role. With this new approach, we hope to see safety at the forefront of every enterprise’s mandate in the years to come.
For a more comprehensive breakdown of 2018, download our e-magazine.
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