Sectors
Buying a fire and security business, and how lenders look at it
Fire and security is one of the few trade sectors with a genuinely contracted, genuinely recurring revenue line sitting inside it. It is also one where a change of ownership can put the company's ability to trade at risk if the accreditations are not handled properly.
What you are actually buying
Monitoring and maintenance, with install revenue attached
The revenue in a fire and security business separates cleanly, and it is worth insisting on the separation before price is discussed:
- Monitoring and connection income. Recurring, contracted, billed in advance in many cases, and sticky because changing provider means changing the equipment or reprogramming it. This is the most valuable revenue in the sector.
- Maintenance and servicing. Contracted visits against fire alarms, extinguishers, emergency lighting, intruder and CCTV systems. Predictable and often mandated by the customer's own insurer or by regulation, which is a large part of why it renews.
- Installation and remedial work. Project revenue. Real, but it has to be won again next year.
The monitoring line is the reason a specialist lender will look at this sector differently from general trade services. It behaves far more like a subscription book than like contracting revenue, and a lender who has funded it before knows to test it as one. Read how lenders assess recurring revenue for what that test looks like.
What carries value
The things that move the number
Connection count and churn
How many monitored connections, on what terms, and how many were lost last year. A monitoring base with low churn is the closest thing in the trades to an annuity.
Accreditations
Third party certification is often what lets the company hold the contracts at all. Which body, in whose name, and what happens on a change of control.
Contract terms
Length, notice, uplift provisions and whether the customer or the company owns the installed equipment. Ownership of the kit changes how easily a customer can leave.
Compliance-driven demand
Servicing that exists because the customer has a legal or insurance obligation renews more reliably than servicing that is a good idea. Know which you are buying.
Engineer coverage
Response obligations in the contracts have to be deliverable from the engineer base you inherit, in the geography you inherit.
Systems and records
Service records against every device on every site are both a compliance requirement and a sales asset. Poor records are a liability you are buying.
The lender's view
What lenders look at, and what makes them nervous
What gives a lender comfort
- A monitoring schedule that reconciles to the ledger, connection by connection.
- Low, evidenced churn over several years.
- Accreditations held by the company with a clear route through a change of control.
- Servicing driven by the customer's own compliance obligations.
- A buyer already operating in the sector with the same accreditations.
What makes a lender nervous
- Accreditation that lapses, or has to be reapplied for, on a change of ownership.
- Monitoring contracted through a third party receiving centre on terms that can be withdrawn.
- Heavy install weighting with the recurring line presented as the whole business.
- Response obligations the engineer base cannot actually meet.
- Gaps in service records against safety-critical equipment.
Deal shapes
The structures that actually get funded
Monitoring base purchase. The connections and the contracts are bought without the rest of the business. Common, and usually structured with staged payments against connections that actually transfer.
Trade bolt-on. A regional operator buys a neighbouring company to add density and engineer coverage. The most fundable shape, because the buyer already has the accreditations and the trading record. See bolt-on acquisitions.
Share purchase to preserve accreditation. Where certification and customer contracts are held in the company and would be difficult to novate, buying the shares can be the only practical route even though it carries more risk. This is a real example of the tension in share purchase versus asset purchase: the cleaner structure on paper is not always the one that keeps the business trading.
Paperwork
What you will be asked for
- Three years of accounts and current management figures.
- Monitoring schedule: customer, site, connection type, monthly or annual value, contract dates.
- Maintenance contract schedule with the same detail.
- Revenue split between monitoring, maintenance and install, over at least two years.
- Churn and renewal history on the monitoring base.
- All accreditation certificates, the certifying body, and the renewal date.
- The alarm receiving centre agreement, where monitoring is handled by a third party.
- Engineer list with qualifications and vetting status.
- Service record completeness against the installed base.
Traps
The ones that cost buyers money
Assuming accreditation transfers. The single biggest sector-specific risk. Certification is granted to a business against assessed processes and people. A change of control can require notification, reassessment, or in some cases a fresh application. Establish the position with the certifying body in writing during diligence, not afterwards.
Monitoring you do not control. If the connections sit with a third party receiving centre under an agreement that can be terminated or repriced, the recurring revenue you paid for has someone else's hand on it.
Equipment ownership. Where the customer owns the installed system, they can move provider easily. Where the company owns it, they cannot. That difference belongs in the price.
Inherited compliance gaps. Missing service records on fire safety equipment are not a paperwork problem. They are a liability, and they are yours after completion.
Vetting and screening. Security work often requires screened staff. An engineer base that cannot be screened to the standard your contracts require is a contract you cannot keep.
Why us on this one
We know who treats monitoring income as an asset
The part that is hard to buy is knowing which lenders have funded monitoring bases before, and therefore already understand that a connection schedule is worth more than the van fleet.
Tell us the connection count, the churn history and the accreditation position. We go to the people who have done this before and come back to you with who can fund it and what they will want to see.
We introduce buyers who are acquiring through a limited company or a NewCo. If you are buying personally, as a sole trader or as a partnership, we will point you to an authorised firm directly instead.
Tell us what the monitoring base looks like
Connection count, contract terms and which accreditations the company holds. Send us that and we go to the lenders who understand monitoring income.