Valuation of security monitoring business

by a searcher from EMLYON Business School

3 years ago

Would anyone have good precedent transactions comps in the physical security monitoring sector. I am looking at a business involved in CCTV security monitoring. They are outsourced the installation and maintenance of the CCTV but keep the monitoring contract which generates high level of recurring business . Any valuation benchmark on similar transaction would be helpful to help educate the vendor.

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searcher from Stanford University - Graduate School of Business

2 years ago | like reply | 1 like

searcher from Massachusetts Institute of Technology - MIT Sloan School of Management

The key is to understand the steady state cashflow. These businesses lose cash on every new sale (and usually take###-###-#### months to breakeven) and they typically have a decent amount of churn, so they need to burn cash just to stay flat. As a result, EBITDA is often overstated (the upfront expenditure on a new installation is capitalized).

3 years ago | like reply | 0 likes

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