KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Buy – sell deals remain vibrant
October 19, 2020
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Webinar:
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Title: Importance of Sound Financial Management; How to make your company bankable
When: November 4, 2020 Time: 12 PM noon ET
Presented by: Mitch Reitman
Hosted by: Ken Kirschenbaum
Who should attend: owners, CFO, general managers
Register Here: https://attendee.gotowebinar.com/register/8666979981049202187
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Buy – sell deals remain vibrant
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Even in these crazy times – covid concerns – shut down affecting businesses – politics – there remains a keen interest in acquiring alarm contract accounts. The alarm contract, backed by its RMR, is, not surprisingly, recognized as a constant viable investment by those in the alarm industry and others interested in RMR investments. Curiously, unlike the stock market, silver or gold investments that trade up and down, the value of alarm contracts are relatively stable and constant. Most alarm companies falling within the median range of RMR [let’s call it $5K to $50K] can expect to start negotiations around 35 times RMR. Sure, there are many other factors used besides the RMR to arrive at the ultimate purchase price, but you need to start somewhere.
Today’s topic was inspired by Jim Wooster Jr of Alarm Financial Services. He wrote to me:
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Ken,
Thanks for posting our listing to The Alarm Exchange.
I noticed that you are representing a seller listed in the Mergers and Acquisitions section ($45,000 in NJ). You can certainly mention in this listing that “financing is available” in order to attract more potential buyers.
Regards,
Jim Wooster Jr
Alarm Financial Services, Inc.
866-204-9350 x 1200
415-509-4750 cell
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Alarm companies looking to buy accounts may not be constrained by their own financial resources or even their estimate of cash flow and debt service when buying alarm contract accounts. While traditional lenders – particularly the alarm company’s bank – may have no interest in providing funding unless backed by personal assets, such as a mortgage on a residence – there are funding resources, such as Alarm Financial Services, that rely on the RMR in the alarm contracts.
Theoretically it’s possible that the proposed acquisition will be evaluated to be sufficient to stand on its own, meaning that the accounts being acquired would be sufficient to support the debt service owed to a lender who funds the entire purchase. Obviously not all, or even many, transactions will meet the necessary criteria, but when considering a prospective deal funding may be available, and that’s the point; you should consider this option.
Seller too should welcome funding from a knowledgeable alarm industry lender. While banks or institutional lenders typically make deals more difficult, sometimes fatally so, an alarm industry lender like Alarm Financial Services is likely to facilitate the transaction.
From what I see, there are still more buyers than sellers; just check out the posts on The Alarm Exchange in the Merger and Acquisition category. Many buyers don’t realize that they may be able to consider bigger deals than they thought, and that’s because of third party funding. When considering this option be careful because not all funding sources are going to be able to evaluate your transaction and this outside third-party review is likely to make a significant contribution to a successful transaction. The Woosters, for example, have extensive alarm industry experience and if they evaluate a transaction and agree to fund it, both seller and buyer can be encouraged that the deal makes sense; more importantly, that the buyer will be able to re-pay AFS and remain economically viable.
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THE ALARM EXCHANGE
This area is reserved for alarm classifieds, alarm company announcements, solicitations, offers, etc.
There is no charge to post a listing here.Include your contact information, phone, email and web site. If you would like to submit a post, please send an email to ken@kirschenbaumesq.com. To create a reciprocal link to our website, click here.
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
www.KirschenbaumEsq.com
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