Is ADT Security for Sale? Rumors Swirl of Potential ADT Purchase by French Energy Conglomerate

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Reports of the potential purchase of ADT first surfaced in April, and then again earlier this month. Sources included the New York Post, and of course the news spread from there – not only to the financial media, but also to the publications that cater to the electronic security industry. Since the general public rarely gets to see alarm industry “insider reports,” I thought I’d share with you this recent article, from Security Director News.

Speculation that Schneider Electric may indeed be interested in acquiring Tyco International, or at least part of the conglomerate, began circulating again, May 13 after the New York Post reported that Schneider is in talks with private-equity firms about a $30 billion-plus bid.

Tyco Owns ADT

As many of you may know, Tyco International owns ADT Security. Tyco split into three separate companies in 2007, and ADT represents the bulk of the business in Tyco’s fire and security division.

Schneider’s plan, according to the Post, is to split Tyco’s assets, keeping the fire and security businesses (ADT and SimplexGrinnell make up the biggest parts of those two units) and ditching the flow control unit and part-ownership Tyco still has in has its electrical and metal units.

The Plot Thickens

The Post also reported there’s a possibility that several PE (Private Equity) firms will partner and make their own offer for Tyco. The Post also reported that if Tyco began a formal auction, analyst Brian Langenberg believes Siemens, which is rolling out a global cities platform, and United Technologies, whose head of business development used to run UTX’s fire and security business, could take a look as well.

Now that could be interesting. There have been rumors for years that other players (including several of Wall Street’s large “takeover” firms) were looking at Tyco as a potential target. In today’s uncertain economy, businesses with significant recurring revenue (such as alarm companies) are viewed as more stable, and therefore more reliable as an investment.

Will It Happen?

The Post story, and several other news outlets which cited the New York Post report, noted the Schneider denies that it was in talks with Tyco or even interested. On April 20 on Schneider CEO Jean-Pascal Tricoire said: “There is no plan of large-sized acquisitions now and in the foreseeable future.” But the reports point to Tyco CEO Ed Breen’s comments during Tyco’s April 28 conference call as evidence that Tyco wouldn’t object to the bid, as reported by Security System News, the sister publication of Security Director News. “We always, as a management team, present to our board and talk to them about all the alternatives you can have to create long-term sustainable shareholder value,” Breen said.

What Does This Mean to You?

It’s hard to say if this rumored transaction will even occur – and even harder to predict what the impact would be on ADT, or its customers. ADT currently has its hands full, working hard to assimilate the acquisition of Brink’s/Broadview, while rolling out the new Pulse offering that is supposed to put ADT back on the technology map. Speaking of rumors, it is said that neither project is going well: sounds as if the million-plus Brink’s US customers were accustomed to a much higher level of service at Brink’s than they are now receiving, and it appears Pulse is taking longer to get off the ground than ADT expected. Would a change in ownership help move things forward? Perhaps – but there would also be a tremendous amount of distraction if the company changes hands.

Like other alarm companies, we keep our eyes on ADT. After all, ADT is by far the largest of the roughly 13,000 alarm companies operating in the US. In fact, few people can name the #2 company: it’s Protection One, in distant second place. But the fact remains: we like having ADT as a competitor. They spend a lot of money on advertising, which helps us all. And when it comes to technology and quality of service, you can often do better with a smaller, nimbler company. That’s why we recommend that anyone shopping for security should read the reviews and do the homework. The harder you look, the more you’ll find attractive alternatives to the 800 lb. gorilla. FrontPoint is a great example: as the #1 ranked home alarm company in the US, we are all about cutting-edge alarm technology and world-class service. And by the way, FrontPoint is not rumored to be for sale!

Comments (18)

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  1. Mr Real

    When the ” smoke clears ” …. ADT will still be there through all the bashing that goes on day in and day out. Alarm companies can give away FREE SYSTEMS all day long but when a mom & pop operation have no ” qualified techs ” to correct the issue then you back to square one. So ADT is a little higher – so what ??? If you walk on a Cadillac dealer lot and only got $$$ for a Kia , guess what – YOU ONLY GONNA GET A KIA ….. Bash Away – I see this posting is over 1 1/2 years old and ADT still number #1 ….. run behind and catch up. And for FrontPoint Security ……. WHO ???????? …… Enough Said …..

    • Peter M. Rogers

      Thanks, “Mr. Real” – well, it’s certainly clear how you feel. There are several ironies about your post that I am happy to point out, but I do want to express my appreciation for the opportunity to provide additional clarification about the contents of my blog.

      You are certainly right that ADT will be around for a long time. After all, the have over 6,000,000 customers, and they formed the company (American District Telegraph) in 1874. We don’t expect their untimely demise, although it would not be a total surprise to see them acquired once Tyco breaks into three separate entities this month. And even if someone did buy ADT, I am confident they would keep the ADT name intact, since it’s so well known.

      As for “Free Systems” that alarm companies offer, we don’t sell one here at FrontPoint: we don’t believe that’s the right way to sell security. But the ADT Authorized Dealers advertise “Free Equipment” and a $99 “Activation Fee” all the time. However, it’s a teaser system that they provide for free – not really enough for 95% of the homes they try to protect. When that basic system is adjusted to provide adequate protection, it’s anything but free – and ends up costing a lot more than a comparable system from FrontPoint. It’s widely considered a kind of a “bait & switch” tactic, and folks resent it – which hurts ADT’s reputation. It’s also interesting that you refer to FrontPoint as a “mom and pop operation” when we are one of only a handful of truly nationwide alarm service providers – and actually are in the top 20 out of over 13,000 US alarm companies. If that means mom & pop to you, so be it, but you should also recognize that we remain well ahead of ADT on monitoring technology (we’ve always used safer 100% cellular monitoring, and we have been providing interactive services – better than ADT’s recent “Pulse” offering – since 2007).

      The technician issue is an interesting one. FrontPoint has actually led the way with the most highly refined “plug & play” alarm services and home automation platform you can find – anywhere. Folks who insist you need and alarm technician are often the same people who said that consumers would never set up their own routers or PC’s in the home. The times, they are a-changin’, my friend. And DIY is not just more convenient and efficient for the homeowner: it can also result in tremendous customer satisfaction, when done well. That is one more reason that we have the best reviews of any nationwide alarm company, and the lowest customer cancellation rate.

      Speaking of customers walking away, ADT just reported an annual cancellation rate of 13.5% That means that ADT has to replace one in sever customers each year, just to stay even. That is actual above the average cancellation rate for the alarm industry – from the biggest company. Not a good sign…

      Thanks again for your comment. Today, and for the foreseeable future, I’ll be placing my bet on FrontPoint. And so will a lot of US consumers who want safer, smarter, simpler, and more affordable peace of mind that is virtually impossible to defeat.

  2. Mr Real

    When the ” smoke clears ” …. ADT will still be there through all the bashing that goes on day in and day out. Alarm companies can give away FREE SYSTEMS all day long but when a mom & pop operation have no ” qualified techs ” to correct the issue then you back to square one. So ADT is a little higher – so what ??? If you walk on a Cadillac dealer lot and only got $$$ for a Kia , guess what – YOU ONLY GONNA GET A KIA ….. Bash Away – I see this posting is over 1 1/2 years old and ADT still number #1 ….. run behind and catch up. And for FrontPoint Security ……. WHO ???????? …… Enough Said …..

    • Peter M. Rogers

      Thanks, “Mr. Real” – well, it’s certainly clear how you feel. There are several ironies about your post that I am happy to point out, but I do want to express my appreciation for the opportunity to provide additional clarification about the contents of my blog.

      You are certainly right that ADT will be around for a long time. After all, the have over 6,000,000 customers, and they formed the company (American District Telegraph) in 1874. We don’t expect their untimely demise, although it would not be a total surprise to see them acquired once Tyco breaks into three separate entities this month. And even if someone did buy ADT, I am confident they would keep the ADT name intact, since it’s so well known.

      As for “Free Systems” that alarm companies offer, we don’t sell one here at FrontPoint: we don’t believe that’s the right way to sell security. But the ADT Authorized Dealers advertise “Free Equipment” and a $99 “Activation Fee” all the time. However, it’s a teaser system that they provide for free – not really enough for 95% of the homes they try to protect. When that basic system is adjusted to provide adequate protection, it’s anything but free – and ends up costing a lot more than a comparable system from FrontPoint. It’s widely considered a kind of a “bait & switch” tactic, and folks resent it – which hurts ADT’s reputation. It’s also interesting that you refer to FrontPoint as a “mom and pop operation” when we are one of only a handful of truly nationwide alarm service providers – and actually are in the top 20 out of over 13,000 US alarm companies. If that means mom & pop to you, so be it, but you should also recognize that we remain well ahead of ADT on monitoring technology (we’ve always used safer 100% cellular monitoring, and we have been providing interactive services – better than ADT’s recent “Pulse” offering – since 2007).

      The technician issue is an interesting one. FrontPoint has actually led the way with the most highly refined “plug & play” alarm services and home automation platform you can find – anywhere. Folks who insist you need and alarm technician are often the same people who said that consumers would never set up their own routers or PC’s in the home. The times, they are a-changin’, my friend. And DIY is not just more convenient and efficient for the homeowner: it can also result in tremendous customer satisfaction, when done well. That is one more reason that we have the best reviews of any nationwide alarm company, and the lowest customer cancellation rate.

      Speaking of customers walking away, ADT just reported an annual cancellation rate of 13.5% That means that ADT has to replace one in sever customers each year, just to stay even. That is actual above the average cancellation rate for the alarm industry – from the biggest company. Not a good sign…

      Thanks again for your comment. Today, and for the foreseeable future, I’ll be placing my bet on FrontPoint. And so will a lot of US consumers who want safer, smarter, simpler, and more affordable peace of mind that is virtually impossible to defeat.

  3. r j brown

    ive been with adt as a armed patrol officer for 8 years. i have been there for all the changes,none of which worried me…this one does..adt has so many lawsuits aganist it and with 1000s of brinks customers leaving adt,due to lack of service..moving to a llc company will save tyco tons of money. patrol officers are underpaid and very very under staffed…and overtime being more or less zip…the service wont get any better..over 6 years ago adt farmed out all of OC, i have a feeling they will do that with LA county soon..or sell all together…managment is a complet loss,and needs to be changed…its been the same for the whole 8 years ive been with them..i love my job and i love adt…at some point one needs to open their eyes and know that change isnt comming anytime soon in management…they have no one else to blame..but the manage to make sure it looks like its us….

    • Peter M. Rogers

      Thanks, RJ, for your comment. I’m sorry to hear that things are not the way you would like to see them at ADT – they are a huge, multifaceted company, and they have gone through a tremendous number of changes over the years. I remember when they bought my old company, Alarmguard. In the year after the purchase, the annual cancellation rate for that portfolio of over 100,000 customers tripled to over 30%, primarily because of poor service. Even today ADT reports a cancellation rate of 13.2%, higher than the industry average. That means they have to create over 700,000 new customers a year, just to stay level – no wonder they advertise so much! I’ve also read a lot about the unhappy Brink’s customers that were acquired by ADT. Brink’s had great service, and it was a rude shock for lots of folks when all of a sudden it was ADT answering the phone. It’s admirable that you love your job, despite the challenges, and good for you that you can remain loyal to the company despite all the ups and downs. I hope it works out for you – ADT needs all the loyal, experienced, and committed employees they can find – and retain. Thanks again.

    • Steve

      RJ has some very valid points. I have been with ADT for almost 8 years myself and there is major leadership gaps within the company, which I think is one of the problems with a publicly traded company. The managed decline in my opinion came with ADT being acquired by Tyco in 1997. Tyco came in and changed the customer service focused company to become a centralized marketing, opertions, & service provider which took alot authority out of the hands of the local offices around the country. I have a slightly different view then RJ as I am a outside sales rep in the southeast. ADT is a great company and has created a good name for themselves and I am very proud to work for them. But they have some real challenges to overcome and it starts with the core leadership and sticking to something for long period of time and not being completely consumed with making a quick buck and showing a profit ever quarter. In closing I will say that I think most of the posts about acquisitions are misguided as it is my hunch that Tyco Intergraged Security will not be acquired first, but ADT. I have heard multiple rumors that ADT will be purchased by AT&T as AT&T is interested in getting into the alarm industry national.

      • Peter M. Rogers

        Thanks, Steve, for your comment. I congratulate you for your loyalty to ADT – and in several respects I agree with you. For one thing, there are lots of folks who feel that Tyco has not done much to enhance the image or reputation of ADT: in fact, just the opposite may be true. Tyco pushed ADT into a ton of acquisitions, becasue they wanted to grow really fast, and service suffered terribly. Then they stopped the acquisitions and focused on the ADT Authorized Dealer program, which has its own set of challenges. At this point ADT loses so many customers – almost one out of every seven each year, by their own reporting – that they have to create over 700,000 new subscribers each year just to stay even. And that means all the energy and attention go into sales and marketing, and not into service. The irony is that more service attention would result in lower attrition. They are caught in a vicious cycle, and it may require an acquisition by someone like ADT to break the cycle. Good luck to you, and thanks again.

  4. r j brown

    ive been with adt as a armed patrol officer for 8 years. i have been there for all the changes,none of which worried me…this one does..adt has so many lawsuits aganist it and with 1000s of brinks customers leaving adt,due to lack of service..moving to a llc company will save tyco tons of money. patrol officers are underpaid and very very under staffed…and overtime being more or less zip…the service wont get any better..over 6 years ago adt farmed out all of OC, i have a feeling they will do that with LA county soon..or sell all together…managment is a complet loss,and needs to be changed…its been the same for the whole 8 years ive been with them..i love my job and i love adt…at some point one needs to open their eyes and know that change isnt comming anytime soon in management…they have no one else to blame..but the manage to make sure it looks like its us….

    • Peter M. Rogers

      Thanks, RJ, for your comment. I’m sorry to hear that things are not the way you would like to see them at ADT – they are a huge, multifaceted company, and they have gone through a tremendous number of changes over the years. I remember when they bought my old company, Alarmguard. In the year after the purchase, the annual cancellation rate for that portfolio of over 100,000 customers tripled to over 30%, primarily because of poor service. Even today ADT reports a cancellation rate of 13.2%, higher than the industry average. That means they have to create over 700,000 new customers a year, just to stay level – no wonder they advertise so much! I’ve also read a lot about the unhappy Brink’s customers that were acquired by ADT. Brink’s had great service, and it was a rude shock for lots of folks when all of a sudden it was ADT answering the phone. It’s admirable that you love your job, despite the challenges, and good for you that you can remain loyal to the company despite all the ups and downs. I hope it works out for you – ADT needs all the loyal, experienced, and committed employees they can find – and retain. Thanks again.

    • Steve

      RJ has some very valid points. I have been with ADT for almost 8 years myself and there is major leadership gaps within the company, which I think is one of the problems with a publicly traded company. The managed decline in my opinion came with ADT being acquired by Tyco in 1997. Tyco came in and changed the customer service focused company to become a centralized marketing, opertions, & service provider which took alot authority out of the hands of the local offices around the country. I have a slightly different view then RJ as I am a outside sales rep in the southeast. ADT is a great company and has created a good name for themselves and I am very proud to work for them. But they have some real challenges to overcome and it starts with the core leadership and sticking to something for long period of time and not being completely consumed with making a quick buck and showing a profit ever quarter. In closing I will say that I think most of the posts about acquisitions are misguided as it is my hunch that Tyco Intergraged Security will not be acquired first, but ADT. I have heard multiple rumors that ADT will be purchased by AT&T as AT&T is interested in getting into the alarm industry national.

      • Peter M. Rogers

        Thanks, Steve, for your comment. I congratulate you for your loyalty to ADT – and in several respects I agree with you. For one thing, there are lots of folks who feel that Tyco has not done much to enhance the image or reputation of ADT: in fact, just the opposite may be true. Tyco pushed ADT into a ton of acquisitions, becasue they wanted to grow really fast, and service suffered terribly. Then they stopped the acquisitions and focused on the ADT Authorized Dealer program, which has its own set of challenges. At this point ADT loses so many customers – almost one out of every seven each year, by their own reporting – that they have to create over 700,000 new subscribers each year just to stay even. And that means all the energy and attention go into sales and marketing, and not into service. The irony is that more service attention would result in lower attrition. They are caught in a vicious cycle, and it may require an acquisition by someone like ADT to break the cycle. Good luck to you, and thanks again.

  5. sfearn

    Hi I adore your blog. I actually just started one of my own, studied a lot from this website. Thank you

    • Peter M. Rogers

      You are most welcome! As for this story, with ADT’s separation from the other two divisions of Tyco (flow control and commercial/fire alarms) slated for next month, the rumor mill is still churning.

  6. sfearn

    Hi I adore your blog. I actually just started one of my own, studied a lot from this website. Thank you

    • Peter M. Rogers

      You are most welcome! As for this story, with ADT’s separation from the other two divisions of Tyco (flow control and commercial/fire alarms) slated for next month, the rumor mill is still churning.

  7. Alan

    Very interesting post, Peter. I hope UTX doesn’t buy them as that may complicate some dynamics for FP (as you’ve highlighted in past blog posts, UTX bought GE Security awhile back, so they also make most of the equipment Frontpoint uses).

    Also it would seem that almost all of these potential acquirers have an excellent chance of doing a better job at the business since ADT has set a sufficiently low bar.

  8. Alan

    Very interesting post, Peter. I hope UTX doesn’t buy them as that may complicate some dynamics for FP (as you’ve highlighted in past blog posts, UTX bought GE Security awhile back, so they also make most of the equipment Frontpoint uses).

    Also it would seem that almost all of these potential acquirers have an excellent chance of doing a better job at the business since ADT has set a sufficiently low bar.

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