KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Comment on covid and valuation / register today for Financial Webinars - see below
September 9, 2020
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Comment on covid and valuation from article on August 28, 2020
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Ken
The one comment I would make about your response below is that not all account bases can be guaranteed to attract multiples of 35X for regular accounts and 40X for fire accounts and I think it is imprudent to suggest that this is the case whether covid 19 was around or not.
Even if the account base was all contracted and on call forward lines, in my experience you have at least 2 other important variables to consider- the size of the account base and the average rate on the accounts. It is surprising how much a buyer can pay on an account base priced at $20/mth/acc versus $30/mth/acc.
In my world(Canada) 35X would be a high multiple for any account base under 500 accounts or under $25/mth/acc.
Regards,
Victor Harding
Harding Security Services Inc.
Toronto , ON M4T 1A3
416.925.7474
Cell: 647.290.7902
victor@hardingsecurity.ca
www.hardingsecurity.ca
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Response
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If I said apples were selling for 38 cents a pound I don’t think every bushel would fetch the same price. Same with alarm accounts. Some are worth more than others; some worth nothing at all. I agree with your comment regarding valuation. I think the more accounts you have for sale the higher the multiple. But even that’s not a unwavering fact of life. I small deal with 100 or so accounts may very well attract a buyer with a higher multiple because the difference in overall price is not going to be significant and the buyer may want the accounts. Sure the difference in price would be 60K versus 90K, but the account base may be important enough to over-pay. Supply and demand applies to alarm accounts and deals too. By the way, your analysis is applicable to US as well as Canada.
When generalizing we need a starting base. There are numerous factors that are considered when valuing alarm accounts, and this forum has addressed just about all of them. I won’t review those characteristics that contribute to higher multiples in this article, other than updated contracts as the number one criteria, because I am planning to announce a webinar series by lenders to the alarm industry and they will no doubt address valuation and how they calculate their loan strategies and valuations.
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WEBINAR SCHEDULE AND REGISTRATION
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Webinar Series: Financing for the alarm industry
When: September 15, 2020 12 PM ET half hour presentation and then Q&A
Topic Details: How to Use Lending to Grow Your Business - A general overview of how an alarm dealer can use lending to grow, such as making a acquisitions, buying out a partner, fueling organic growth, consolidating debt, etc.
Presented by: Jim Wooster and Jim Wooster Jr. Alarm Financial Services, Inc 866-204-9350 ext 1200 www.alarmfunding.com
Hosted by: Ken Kirschenbaum
Who should attend: company owners and CFOs
Register: https://attendee.gotowebinar.com/register/5986254083373814030
This webinar will be recorded and available at https://www.kirschenbaumesq.com/page/alarm-webinars
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Webinar Series: Financing for the alarm industry
When: September 17, 2020 12 PM ET half hour presentation and then Q&A
Topic Details: How to Finance an Acquisition - A more specific drill-down on this method of growing by purchasing the accounts of another alarm company
Presented by: Jim Wooster and Jim Wooster Jr. Alarm Financial Services, Inc 866-204-9350 ext 1200 www.alarmfunding.com
Hosted by: Ken Kirschenbaum
Who should attend: company owners and CFOs
Register: https://attendee.gotowebinar.com/register/4228983813536754190
This webinar will be recorded and available at https://www.kirschenbaumesq.com/page/alarm-webinars
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Webinar Series: Financing for the alarm industry
When: September 22, 2020 12 PM ET half hour presentation and then Q&A
Topic Details: How to Finance Organic Growth - A more specific drill-down on the many ways loan financing can help an alarm dealer grown organically through covering creation costs, enabling leasing, expansion, etc.
Presented by: Jim Wooster and Jim Wooster Jr. Alarm Financial Services, Inc 866-204-9350 ext 1200 www.alarmfunding.com
Hosted by: Ken Kirschenbaum
Who should attend: company owners and CFOs
Register: https://attendee.gotowebinar.com/register/3255545487536556558
This webinar will be recorded and available at https://www.kirschenbaumesq.com/page/alarm-webinars
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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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