KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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comment on how proprietary systems affect valuation / cybersecurity awareness
May 16, 2019
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comment on how proprietary systems affect valuation from article on May 6, 2019
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Ken:
    On the question of proprietary systems and valuation, our experience is that it can cut both ways (i.e. either a favorable or unfavorable impact). The direction of the impact tends to be centered around two issues: 1) does the access to the product line come with the deal; and 2) what are the performance dynamics associated with the accounts and the continued opportunity. 
    On the first point, even well performing accounts are likely to trade at a discount if access to the underlying equipment and services are restricted or non-existent. 
    On the second point, the critical metrics are attrition rate, margin on the ongoing services (RMR+Billable Service), and new customer origination dynamic including the associated market opportunity. 
    As one would expect, if a transaction were to include access to a highly sought after product line, that is complimentary to the buyers existing capabilities, with a large market opportunity at a favorable sales dynamic, and including a low-attrition, high margin (and/or high margin potential) account base, then a likely premium on the valuation could be obtained. The opposite would yield a discount. Different combinations of these features could yield anything in between. Like many aspects involved in selling ones business, this topic has a high burden of proof on the seller. It is important to be clear and well documented on the subject.
  Michael Barnes
  www. barnesassociates.com ‚Äč
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cybersecurity awareness
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Ken,
    I appreciate that you promoted SecureXperts on your forum. The awareness to the industry will prove valuable. China has targeting the low end market supply chain to attack US information and data privacy at the consumer level. It has been happening for years.
    Alarm contractors need to know what their competitors are doing in the industry, such as adding and selling cybersecurity and other professional services, and moving more toward a managed security model with RMR. Those that don't will indeed see a decline in accounts and suffer monetarily. 
    While the system integrators still have value to their customers as trusted providers, the industry and market is fickle when Sam’s Club and WalMart and Home Depot offer Ring, NIST, and wireless cameras below cost – and will eventually move into the semi-professional installation market like what Geek Squad does with AV and pro audio home setup.
  Darnell Washington, President/CEO
  SecureXperts, Incorporated
  844-213-4256 (NEW)
  www.securexperts.com
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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