Security Solutions Market Update – July 2023

Systems Integrator Growth Driven by Rapid Technology Evolution in Security Solutions Market

Capstone Partners released its July 2023 Security Solutions Market Update, reporting that a robust spate of private equity-led add-on acquisitions, driven by consolidation among systems integrators, has buoyed merger and acquisition (M&A) activity in the Security Solutions sector through year-to-date (YTD) 2023.

Deal volume in the sector has moderated year-over-year (YOY), however, technology innovations have created new revenue opportunities to drive growth, supporting a healthy forecast for dealmaking through year-end. To date, M&A activity in the Security Solutions sector has also shown greater resilience than the broader M&A market. Through Q1 2023, sector deal volume declined 19.6% YOY, compared to a 25.2% YOY drop in the broader M&A market, according to Capstone’s Q1 2023 Capital Markets Update. Financial buyers in particular have kept M&A volume afloat in the sector, accounting for 57.1% of all transactions through YTD. Private equity buyers in the sector have opted to acquire businesses almost exclusively through established portfolio companies.

While the advent of new Internet of Things (IoT)-connected physical security devices have improved end user accessibility and data collection, the integration of physical and digital security solutions has brought on new cybersecurity challenges. In turn, security systems integrators have evolved their service offerings to adapt to more complex security environments. Systems integrators operating in the Security Solutions space have previously integrated individual and localized physical security devices. Since the IoT connects all devices through a common network, integrators have pivoted their services to address multiple security vulnerabilities at once. This has led to more comprehensive security product models for Residential and Commercial end markets, as companies are now able to market packaged services that include product and integration. Packaged services such as Video Surveillance-as-a-Service (VSaaS) and Access Control-as-a-Service (ACaaS) have benefitted systems integrators through recurring revenue streams and increased sales.

Also included in this report:

• A breakdown of public company performance, categorized by end market and segment.
• How strong sentiment from U.S. citizens on elevated crime has benefited investment into the sector.
• Leading companies in the sector that have focused on IoT-connected physical security products.