Industry growth may prompt future investment in security

Dec 22, 2003 12:00 PM

After growing nearly 7 percent per year from 1996 to 2001, the global security industry is expected to grow at a rate of approximately 8.5 percent annually over the next few years, reaching more than $180 billion in revenue by 2006, according to the Freedonia Group.

Michael Pohlen, vice president of U.S. Bancorp Piper Jaffray's Middle Market Mergers and Acquisitions (M&A) group, believes growth in the security industry is broadly driven by three factors: crime, terrorism and other security threats; economic growth; and improvements in security technology.

Pohlen says fragmentation in the marketplace will result in further industry consolidation as consolidators seek to broaden both their customer bases and their product/service offerings, as well as build scale. In addition, he believes the attractive characteristics of the security industry will also bring heightened awareness from the private equity community as these groups seek to put capital to work for their investors in high growth opportunities.

"Private equity firms have begun to seek acquisitions in the security industry," Pohlen says. "They are attracted to the strong cash flow characteristics, large market size, additional consolidation opportunities and growth prospects associated with the industry."

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