Mergers in the Alarm Industry: What You Need to Know

Mergers in the Alarm Industry: What You Need to Know

Merger
  • In recent years, the trend in many industries has been towards consolidation, and that has certainly been the case in the home security business.  There are many reasons for this, but the main reason is that small, locally owned alarm companies have faced increasing competition from giant corporations including cable companies, tech companies like Google and Amazon, and manufacturers of DIY home security equipment.

    While none of these mega corporations can come close to matching the level of service and overall value provided by a small, locally owned alarm company, they can compete on price.  Some of them even give away home security equipment or sell it at a loss in order to acquire a new customer for their other services.  The only way a small company can possibly compete in this environment is to merge with another company.  But where does this leave the customer?

    Mergers can be a good thing

    The first thing you should understand about mergers in the alarm industry is that they can be a good thing.  When two locally owned alarm companies merge with each other, for example, this allows the new, larger company to more effectively compete with the “big box” companies who only offer home security as an add-on service.

    When a merger like this happens, it preserves a locally owned company as an option for homeowners and prevents the big-box companies from monopolizing the home security market.  If that were to happen, the big-box companies could charge whatever they wanted and reduce their customer service even further than the already low levels it is currently at.  Customers would have to choose between paying higher prices for terrible service or going without a monitored alarm system—not very attractive options.

    If your alarm system is monitored by a locally owned company that merges with another locally owned company that has a good track record of providing high quality service at a fair price, you probably have nothing to worry about.

    When are mergers bad for consumers?

    On the other hand, if your locally owned alarm company is acquired by a large corporation, you could be in for a rude awakening.  What happens in this case really comes down to the nature of the acquisition.

    If the corporate entity that acquired your alarm company keeps everything as is—in other words, keeps the same employees, doesn’t raise rates, and doesn’t change anything that would affect the level of service you’ve grown accustomed to—you may not notice a difference.

    However, more often than not, when a large corporation acquires a locally owned alarm company, this is not what happens.  Because the corporation is focused on the bottom line and has no personal relationship with the individual customers of the locally owned business they purchased, what usually happens is that they will raise prices and cut back on the quality of support in a misguided effort to get a better return on the investment they just made.

    Instead of having a friendly, familiar voice on the other end of the line when you call the alarm company office with a question, you may find yourself speaking to an employee at a call center located in some other part of the country or even offshore.  Instead of having your system serviced by local full-time technicians employed by your company, it may now be serviced by a third-party vendor who made the lowest bid for the service contract.

    If you start to notice some of these types of changes taking place after your local alarm company is acquired by one of the mega-corporations in the industry (such as Johnson Controls, the company that owns ADT), it might be time to switch your monitoring service to a locally owned firm.

    What warning signs to watch out for

    So, how can you tell the difference between a “good” merger and a “bad” merger when it comes to your alarm company?  Here are a few warning signs that might indicate problems on the horizon.

    Poor communication

    If there is little or no communication from your company about the merger or acquisition, this probably isn’t a good sign.  At the very least, it indicates some level of disorganization in the process, which is never a good thing.

    Sudden disappearance of familiar faces

    Often, when one locally owned company merges with or is acquired by another locally owned company, the leadership team will stay in place for a year or more after the merger to help ease the transition process and minimize any disruptions.  If the folks you are used to dealing with at your local company suddenly disappear with no explanation after a merger, this probably means trouble.

    Your alarm company was bought by ADT

    We’re just going to come right out and say it.  If your locally owned alarm company was bought by ADT, this is not a good thing for you.  Be prepared for your prices to go up and level of service to go down.

    Hopefully, this guide helps you better understand mergers in the home security and alarm monitoring industry.  They are happening with increasing frequency and aren’t anything to fear, as long as the customer experience remains the priority throughout the process.