Memoori’s new report “The Physical Security Business in 2013” shows that M&A activity in the Security Industry has grown by a compound annual rate of 7% over the last 14 years but during this time it has peaked and declined four times culminating with its value decreasing by 48% during the last two years.

External forces have influenced this cyclical pattern but in the last two years internal consolidation matters have had more impact. With a drop of 48%, the value of merger and acquisition deals in 2013 was approximately $5.0 billion.

With 34 deals identified in 2013 compared with 56 in 2012. The number of deals and total value of acquisitions has fallen, the average value of a deal has actually increased from $120m in 2011 to $147 million in 2013.

There are three main reasons, namely the industry underwent a major restructuring during the period 2009 to 2011 and in the last two years has paused to consolidate that process, the lack of confidence and/or interest by the major conglomerates to commit more investment to the industry and finally the lack of buyers from outside the business, particularly Defense and IT.

The positive news is that acquisition activity in the middle market, mainly populated by specialist security companies has significantly increased. […]