security technology market Trend 5: Redefining business models whilst the introduction of IP to the video surveillance market began a decade ago it is now fast moving into access control and intruder alarms and will vastly improve performance and extend the value propositions for its customers. Security companies that have grasped this opportunity and can demonstrate how improved ROI can be achieved through making businesses and institutions operate more efficiently are growing fast and profitably. It is now becoming noticeable that a select group of trusted leader companies that have been operating this business model are forging ahead and equally as important is the fact that they have delivered the message at all levels in the decision making chain both direct with the customer and the distribution chain. They have developed business models that are working well meeting head on economic austerity and are winning a bigger share for the security business. However in the video surveillance business all is not well for the leading western manufacturers are losing market share to the Chinese suppliers and particularly two companies Hikvision and Dahua. Hikvision is now around 4 times larger than Axis Communications the No1 western manufacturer. However we are by no means sure that we are comparing apples with apples and believe Hikvision sales includes a significant business in system sales. What is not in doubt is how fast these companies have grown since being formed within the last ten years and their ability to continue growing much faster than leading western manufacturers thanks to their dominance of the China market now the biggest single country market in the world for video surveillance systems. Hikvision’s China revenues accounted for 75% of total business and overseas sales $660 million, 25% of that being sold into the USA. So their home market provides a protected market with almost cast iron prospects for sustained growth to al least the end of this decade. On this basis they have a very solid platform to fight off western manufacturers in their home market if they needed to and buy their way into western markets supported by a very profitable home market. The Achilles heal of Chinese manufacturers today is expertise and experience in IP Network cameras and their application in converging with the business enterprise in vertical markets. As we move forward into IoT this will become the major factor in winning video surveillance business. China is reported to be pressing ahead with a major programme for its Safe / Smart Cities and move into IoT not just buildings. One thing for sure is that leading western manufacturers cannot ignore this market for it offers size and growth that could achieve sufficient scale to rapidly bring down prices but remain profitable and compete with Chinese products. Without this China remains a threat and not an opportunity. In 2015 the value of deals increased to $5700 million with Axis being acquired for $2800M by Canon and the merger of Kaba Holdings and Dorma Holdings. These two mega deals accounted for more than 80% of the total value of acquisitions last year. Trend 6: Growth through mergers and acquisitions 2015 was a very positive year for acquisition deals with volume and value increasing significantly on 2014. More important this has been the second year in succession that players from Group B and C have taken a more active role and through this the industry structure is becoming more effective in delivering customer value propositions. For the last 15 years merger and acquisition activity has been a rollercoaster ride and if history repeats itself then we have started another upward climb in 2015. Volatility has been caused by a number of factors the first is that the industry underwent a major restructuring during the period 2009 to 2011 after the 2008 financial crisis. The second is the lack of confidence and or interest by the major conglomerates in Group A to commit more investment to the industry, and the third reason is that there has been a lack of buyers from outside the business, particularly Defense and IT. The lack of interest from these two groups of wealthy buyers has in part been made up with the fact that within the last three years there has been a significant trend for medium sized specialist companies previously totally dependent on organic growth to adopt strategic acquisition to speed up growth. These companies are much more focused within each of the three sectors and this is having a significant and beneficial impact on the structure of the market. In 2015 the value of deals increased to $5700 million with Axis being acquired for $2800M by Canon and the merger of Kaba Holdings and Dorma Holdings. These two mega deals accounted for more than 80% of the total value of acquisitions last year. Despite the volatility in the M&A market over the last 15 years the trend shows a very significant CAGR of 7% over this period but during this time it has cycled through growth, peak and trough three times culminating with the value of M&A expenditure increasing by 32% this year. External forces have most influenced this cyclical pattern but in the last two years internal consolidation has had much more impact. Order the new Global Security Market report Each year Memoori Research publish an annual report on the state of the Global Security Market. In the report we assess the major techno / commercial trends that are impacting the business. In this article for Detektor International we discuss some of the key trends highlighted in our report. The report can be purchased directly from AR Media International for $999 USD for a Single User License or $1,499 USD for an Enterprise License. Visit: http://www.armedia.se/en/products_other_physicalSecurity_info.asp Security News Every Day – www. securityworldhotel.com dete kto r in te r n at i o n al • 1 3