The life safety industries have been fortunate over the last 20 years in that monitoring services associated with recurring monthly revenues (RMR) have been reliant on hardwired systems whose signals were transported to monitoring centers via the telephone landlines — stable and slowly evolving technologies that created a very sustainable and predictable customer environment. The 21st Century brought a technological revolution, as wireless capabilities became reliable and the Internet and Wi-Fi established new communication platform alternatives for security system monitoring.

As late as the 1990s, the installed life safety equipment and signal platform were very common to both seller and buyers in the market; thus, there was very little impact for these customer characteristics on the valuation of subscriber accounts. If your customers were on non-downloadable panels in the 1990s or you did not have control of your signal carrier line, there might be a deduction by the buyer based upon the realization that they would need to visit each customer to redirect the signal to their central station to gain the full economic benefits of consolidating newly acquired accounts.

As the carriers continue to push to eliminate their landline infrastructure, which will necessitate that a customer be upgraded to maintain service, they also are forging new cellular technologies. Even the early wireless platforms that are not yet 10 years old are beginning to be phased out by the evolution to expanded cellular platforms. The days of trading RMR rooted in wired platforms and associated equipment are over. Those companies that are not working to keep pace with this evolution are causing their valuations to diminish incrementally.

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Article Published By SDM, May 19, 2014

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