First Step in Selling your Security Alarm Business: Hire a Broker

There are many variables to consider when determining how much your alarm company is worth. The primary factor in determining your company’s worth is determined by your recurring monthly revenue (RMR). This is a decidedly different measure than other industries. While there are some security businesses that are still sold on an EBITDA basis, those are usually companies that focus on specialized services not provided by the typical local alarm company. A traditional alarm company almost never benefits selling under the EBITDA formula as it could diminish their value. It is not too uncommon for us to see an uninformed alarm company owner talk to their attorney or traditional business broker to handle the sale of their business, only to find themselves selling for a fraction of the value they are entitled to! A traditional business broker or attorney is typically not experienced enough with this industry to facilitate a profitable sale for a security company owner.

Your main asset is your RMR, which is sold at a multiple usually somewhere between 25 and 40 depending largely on the size of your company. There are other factors to be considered as well, but the amount of RMR is the primary consideration buyers will use when determining your company’s worth. In addition to RMR valuations, most acquisitions include added profits from tangible assets such as service trucks, equipment, inventory, and furnishings. We rarely see real estate holdings transferred in these sales as financing often does not permit it.

In almost all transactions, however, there are other particulars in the deal structure that are as valuable and significant as the rate of RMR. Depending on these other variables, you can add 20 to 50 percent more to your overall profit just by structuring and marketing your deal wisely. Our job is to define and package those variables to increase your bottom line.

Absolutely, and that’s a critical reason why sellers use us. We know how important and sensitive confidentiality is when you are selling. We are cautious to never reveal your intention to sell to any of your employees or customers. Any materials you receive from us will show our shortened name of Legacy Consulting so that our type of business is not revealed.

Our select group of premium buyers, have been prequalified and are legally bound by a Non-Disclosure Agreement (NDA). This guarantees that no one will ever divulge anything about your company or your intention to sell. In addition, no buyer will be allowed to contact your office and must direct all correspondence directly through Legacy Consulting. When prospective buyers want to visit your office, they can be identified as potential customers, investors, or other types of VIP’s.

Truthfully, the short answer is money! Sellers who are unaware of the many variables that can affect the value of their business will never yield the maximum price from skilled buyers who negotiate these deals on a regular basis. Knowledgeable representation means getting your highest price.

The alternative to using a broker is calling your competition directly. That creates an uncomfortable situation that gives your competitors the very information that you DO NOT want them to have. They could use that information against you on future sales calls, not to mention spread the word to your community which could destabilize your customer base.

As an independent third party, we will contact qualified buyers without ever revealing your company’s identity. The security business requires an exceptional amount of confidentiality and discretion during the selling process. Our brokers have all sold their own alarm companies and have been in your current position. We know first-hand how critically important your privacy is.

When you choose a Legacy Security broker, you are immediately equipping yourself with decades of experience specifically and exclusively in this industry. Each of us has bought and sold security companies which garnered comprehensive experience that both traditional and “non-security” brokers rarely possess.

Other brokers who claim to “exclusively” represent security companies subscribe to a dramatically different philosophy. Their marketing tactics and self-promotion can jeopardize the integrity of your company and reputation. Our experience has been that these brokers are often little more than commission sales people who may not put your best interest first.

The quick answer is YES. You have most likely noticed some downturn in your personal business which reflects our economic climate. However, as other types of businesses around you are closing their doors, you are still able to keep moving forward by making internal adjustments along the way. This has been a common story in the security business. Our industry has been largely protected from the devastation that so many others have incurred. This information has been gaining the attention of large investment groups who want to put their money in a safe harbor during this economic storm.

As more and more investment groups are bidding for alarm companies, this has actually increased your chances of getting a high rate at selling time. So, although no one can guarantee you’ll get the trophy price you’re hoping for, there has never been a better time to try!
There are other reasons why this is a good time to sell. Interest rates are at an all-time low which means buyers are seizing these opportunities before the rates go up. There are more potential buyers today than ever before which can only be good for you. Unlike the real estate market, the security industry is experiencing a seller’s market.

Another solid reason to sell now is the capital gains tax rate. A few years ago it was at a very high rate. Now, the money you earn from the sale of your alarm company will be taxed at a much lower rate. Given our political climate, this may change soon, which means the window of opportunity could be closing soon. It may be wise to take advantage of the selling conditions right now.

While it’s true that there has never been a better time for you to sell, there are critical factors that should be overseen by an experienced representative. For instance, how can you be sure that you are getting the best deal or the highest offer? Also, there are many details in the contract you’ll need to watch out for that can affect your final selling price. Have you considered the issues of non-compete, non-solicitation, attrition, and employee matters? I can assure you all of these important matters will come up, and many more. You can’t expect your buyer to present these issues to your advantage.

On another topic, one of the most important things to consider when selling is confidentiality. This is most important during the early stages of negotiations when you’ll want to avoid customer and employee problems. Our Legacy representatives will make contact with all potential buyers confidentially, never identifying your company directly until we find the best match for you.

Not at all. You have a lot of choices right now. There are also many regional alarm businesses that are hoping to expand their market. Oftentimes these smaller players are family owned and will continue to provide your customers with that personalized touch. Among these choices are also investment groups who will acquire your accounts and may allow you to continue to operate as you do now. This option could even be designed so that your customers and employees are unaware of any changes. Legacy interacts with all of these organizations on a consistent basis and will help to clarify all of your options to determine the overall best arrangement for you.

Our fee is generally lower than the sales tax in most states. Usually, the seller pays the broker’s fee or commission on each transaction. This is based on the realistic assumption that having professional representation will increase your overall price. In most cases, the broker’s fee is recovered several times over when compared to a seller trying to market his company alone. Our brokers can also coordinate financing through various industry-specific lenders which not only contribute to a higher price but will also expedite the closing.

In rare cases, buyers who are seeking a specific acquisition in a particular market will contract with Legacy Consulting to find these companies. In which case, the buyer would pay all or part of our fee. In either event, the fee is paid at closing, usually through escrow. Sellers are usually responsible for travel related expenses associated with the direct marketing of their company.