SECURITY SOLUTIONS Q3 2017

CONTACTS MERGER & ACQUISITION ACTIVITY

Todd McMahon Following Capstone’s Q2 report, video solutions continue to be a key growth area for physical Managing Director security players. The adoption of high definition cameras (and the corresponding systems (617) 619-3334 and network upgrades) will keep integrators busy for the foreseeable future. Likewise the [email protected] convergence of IT and with rising global security concerns, and improving cost/benefit ratios for cameras, storage, cloud based systems, etc., make new system Peter Asiaf implementations and upgrades unavoidable for end users. While video will certainly be Managing Director central, advancements in , perimeter/intrusion detection and prevention, (617) 619-3368 scanning, imaging and life safety solutions will all benefit from this rising technological tide. [email protected] Security value-added resellers and integrators will main benefactors of the continued maturation of the sector, though continued technological advancements and subsequent adoption will be far reaching. For example, uniformed guard service providers, would be well advised to monitor these changes as technology has the power to alter traditional service models. Many gear and managed service providers are quick to roll out compelling ROI calculations when compared to traditional solutions. Likewise robotic solutions (including drones) continue to proliferate. While many of these solutions are in their infancy, history is rife with insiders and “smart money’s” misguided assessment of new technologies.

Our point isn’t to predict the future. We aren’t attempting to figure out the winners and losers, nor are we predicting which technologies will be superior. Rather, we are simply pointing out that technology has historically been able to change industries. Advancements and cost reductions in cameras, storage, networking, etc., combined with an extremely dynamic customer base promises to make the next 10 years as exciting as the last 30.

As such, our hypothesis is simply that everyone in the physical security industry should understand their exposure and strategy surrounding technology, for it will have a considerable impact on enterprise valuations today, and for years to come.

M&A Activity: Security Solutions Transaction Volume

140 126 120 96 BOSTON 100 85 89 87 CHICAGO 80 67 LONDON 59 60 LOS ANGELES 40 NEW YORK ORANGE COUNTY 20 PHILADELPHIA 0 SAN DIEGO 2012 2013 2014 2015 2016 YTD 2016 YTD 2017 SILICON VALLEY Source: Capital IQ; Capstone Partners LLC Research TAMPA YTD ended September 1 Security Solutions Q3 2017

NOTABLE SECURITY SOLUTIONS TRANSACTIONS

Several significant transactions were completed in the Security Solutions Industry through Q3 2017. Select transaction profiles are outlined below, followed by a more comprehensive list in the subsequent table.

 ADT acquires Protec (August 2017) – ADT, a leader in security and automation solutions, recently acquired Protec, a prominent commercial security system integrator in the Pacific Northwest. Terms of the deal were not disclosed. The deal represents ADT’s goal of growing its commercial and national accounts in security. Dan Bresingham, ADT’s Chief of Staff, commented, “This acquisition strengthens ADT’s commercial and national accounts business, which continues to grow both organically and through strategic acquisitions. Protec not only bolsters our presence in the Northwest, but also allows us to add additional support and service to new and existing commercial and national account customers throughout the country. The commercial and national accounts security market remains highly fragmented, presenting a compelling growth opportunity for ADT. In addition to a strong account base, the addition of Protec’s exceptional management team brings tremendous value to ADT.” The deal represents the continued trend of consolidation among systems integrators and the value that acquisitions bring in gaining market share.

 Hawk Capital acquires LifeShield (July 2017) – Private equity group Hawk Capital recently acquired LifeShield, a do-it-yourself (DIY) home security solution, from DirecTV. Terms of the deal were not disclosed. LifeShield offers monitored wireless security systems that customers set up themselves, including solutions for live video, fire monitoring and carbon monoxide protection. Prior to LifeShield’s sale to DirecTV in 2013, Mike Hagan, Managing Partner of Hawk Capital, owned and operated LifeShield along with other investors. "After AT&T acquired DIRECTV and decided to divest LifeShield, I leapt at the opportunity to own this great technology and brand once again," said Hagan. "Today's consumer wants an affordable and easy-to-use technologically-advanced, wireless home security system. Wireless DIY has been the fastest-growing part of the 25 million household monitored home security market,” he continued. The acquisition represents private equity’s continued interest in the security industry and the growing trend of DIY in the security industry.

 Eagle Eye acquires Panasonic Cloud Management (June 2017) – Eagle Eye Networks (Eagle Eye), a provider of cloud security and video management systems (VMS), recently acquired Panasonic Cloud Management Service Europe (PCMSEU), makers of Panasonic Cameramanager and Panasonic Nubo. Terms of the deal were not disclosed. The deal will create one of the largest selections of cloud video products in the globe. Rishi Lodhia, Managing Director of Eagle Eye Networks EMEA, commented, “This is a unique opportunity to bring two pioneers in cloud video together and deliver a broad portfolio of innovative cloud surveillance solutions. Eagle Eye and Cameramanager dealers worldwide will now have a wider selection of cloud video products to meet their customers’ needs.”

Capstone Partners LLC 2 Security Solutions Q3 2017

SECURITY SOLUTIONS: SELECT M&A TRANSACTIONS

Enterprise EV / LTM Ann. Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA Summit Fire CI Capital Provides fire protection and mechanical contracting 09/05/17 - - - Protection Partners services. Professional Fire Tech Supplies, installs and maintains fire alarms, security 08/17/17 - - - Alarm Systems Electronics systems and sound systems. Security 08/10/17 Vector Security Provides professional security services. - - - Associates Offers commercial and institutional electronic security, 08/09/17 Protec ADT - - - fire and video systems. Stack-On MidOcean and Manufactures security storage solutions for home, 08/02/17 - - - Products Cannon Safe office and industrial applications. Symantec's Web Provides Secure Sockets Layer, Transport Layer Security 08/02/17 DigiCert - - - Security Bus. and IoT solutions. Aviram Develops secure switching and identity-based policy 08/01/17 Qualys - - - Networks enforcement appliances. AR Automatic VSC Fire Manufactures, installs, maintains and inspects fire 07/31/17 - - - & United Fire & Security protection installations. OMNIPLEX Provides protective security, background investigations 07/31/17 Constellis - - - World Services and personnel security services.

07/28/17 LifeShield Hawk Capital Offers DIY wireless home security solutions. - - -

3SI Security's 07/26/17 Cennox Offers asset protection systems. - - - European Div. Instrument 07/26/17 Transom Shields Designs remote viewing instruments and systems. - - - Technology Provides burglar alarm and fire protection systems and 07/18/17 Bonds Alarm Bay Alarm - - - services. Communications Squan 07/18/17 Offers systems integration services. - - - Specialists Construction Develops a security orchestration and automation 07/18/17 Komand Rapid7 - - - system platform. Tele-Tector Red Hawk Fire 07/11/17 Designs integrated security systems. - - - of Maryland & Security Western Mountain Distributes residential, ranch and commercial security 07/10/17 - - - Security Acquisition devices. Operates as a value-added distributor for network 07/06/17 Fine Tec Exclusive - - - security and data integrity. Gem Jewell Manufactures equipment that enable use of legacy 07/06/17 - - - Electronics Instruments cabling in the installation of security systems. Vivos Develops sensors and systems for the security, safety 07/06/17 Secure Point - - - BioTechnologies and defense industries.

07/04/17 Arjo Systems ASSALOY Provides electronic-ID solutions. - - -

Vanderlande Develops checkpoint security software solutions for 06/30/17 Optosecurity - - - Industries transportation and critical infrastructure markets. BranchServ Systems Manufactures electronically monitored deposit retrieval 06/29/17 SafePak - - - Integration systems and ATM security products. American K-9 Offers operationally readied working dogs to security 06/23/17 Constellis - - - Detection markets.

06/20/17 3SI Security LLR Designs asset protection systems. - - -

Capstone Partners LLC 3 Security Solutions Q3 2017

SECURITY SOLUTIONS: SELECT M&A TRANSACTIONS (CONTINUED)

Enterprise EV / LTM Ann. Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA Hellman Manufactures custom audio/visual products, 06/20/17 SnapAV - - - & Friedman accessories and software for security. Panasonic Cloud Eagle Eye 06/15/17 Develops cloud based video surveillance cameras. - - - Management Networks AlarmForce's US Offers and personal emergency response 06/14/17 Select Security $11.6 - - Sub. Base monitoring services.

06/14/17 AS Solution SOS Security Provides executive protection and security services. - - -

Phoenix JBM Patrol & 06/10/17 Provides security and patrol services. - - - Security Protection Security Grade Offers security consulting and protective services for 06/06/17 Helix TCS $4.2 - - Protective the cannabis industry. Guardian Force 06/01/17 Vector Security Provides professional security services. - - - Security Services Enterprise Provides design-build and build-only security systems 06/01/17 Circuit-Tron - - - Security and systems integration services. Integrated Convergint Offers full service systems and security integration 06/01/17 - - - Security Technologies services. Southlake Per Mar Security Provides installation, servicing and central station 06/01/17 - - - Security and Research monitoring. Provides contract security services for residential 05/30/17 JLH Security Allied Universal - - - communities, condominiums and office buildings. Ravencrest Offers security consulting, training and advisory 05/25/17 CL2G - - - Resources services to the cannabis industry. Designs mobile video surveillance and information 05/11/17 Apollo Video Luminator - - - management solutions. Robotic On The Move Develops artificial intelligence and robotic solutions for 05/11/17 - - - Assistance Systems operational, security and monitoring needs. Horizon Installed Building Offers electrical services for home alarm and camera 05/05/17 - - - Electric Products systems, smartphone controls and lighting. Manufactures signal extension and switching systems 05/04/17 Thinklogical Belden $160.0 3.1x 9.3x to access, distribute and analyze video-rich big data. Operational Convergint 05/01/17 Designs electronic protection systems and solutions. - - - Security Technologies

04/27/17 GreenZone SAIFE Develops security software. - - -

Secure Provides advanced security software focusing on 04/26/17 IAR Systems - - - Thingz industrial IoT and critical infrastructure markets. Video Surv. and Provides video/audio surveillance and access control 04/26/17 DirectView - - - Apex CCTV solutions. Digital Valley Telephone Distributes and installs security, surveillance and 04/26/17 - - - Communications Cooperative monitoring systems. Develops intelligent video software for security and 03/13/17 ObjectVideo Alarm.com - - - safety systems. Invision Provides residential and small business security 03/02/17 SAFE Security - - - Technologies products and services. Fire & Life Blue Point 02/22/17 Offers fire protection and life safety inspection services. - - - Safety America Capital Manufactures mass notification, school safety, intercom 02/07/17 Rauland-Borg AMETEK $370.0 2.3x - communication for education and healthcare markets.

Capstone Partners LLC 4 Security Solutions Q3 2017

DIVERSIFIED IT SERVICES & INTEGRATION: PUBLIC COMPANY TRADING & OPERATING DATA

Price % 52 Wk Market Enterprise LTM EV/LTM Company 9/6/17 High Cap Value Revenue EBITDA Margin Revenue EBITDA Diebold, Incorporated $20.30 63.7% $1,532.9 $3,397.5 $4,463.4 $243.0 5.4% 0.8x 14.0x

Honeywell International Inc. $136.51 97.4% $103,825.3 $110,642.3 $39,359.0 $7,876.0 20.0% 2.8x 14.0x

Johnson Controls International $40.00 81.7% $37,296.0 $52,182.0 $45,127.0 $4,950.0 11.0% 1.2x 10.5x

Kratos Defense & Security $13.81 99.4% $1,202.7 $1,508.9 $701.0 $20.1 2.9% 2.2x NM

Stanley Black & Decker, Inc. $141.70 95.5% $21,701.7 $26,382.1 $11,837.5 $1,908.5 16.1% 2.2x 13.8x

United Technologies $111.21 89.1% $88,831.5 $108,231.5 $58,108.0 $10,375.0 17.9% 1.9x 10.4x

Mean 12.2% 1.8x 12.6x

Median 13.5% 2.0x 13.8x

Harmonic Mean 7.6% 1.5x 12.3x

ACCESS CONTROL: PUBLIC COMPANY TRADING & OPERATING DATA

Price % 52 Wk Market Enterprise LTM EV/LTM Company 9/6/17 High Cap Value Revenue EBITDA Margin Revenue EBITDA Agta Record AG $73.37 96.8% $973.7 $913.9 $420.2 $56.5 13.4% 2.2x 16.2x

Allegion Plc $79.40 95.8% $7,541.8 $8,741.4 $2,326.6 $507.6 21.8% 3.8x 17.2x

ASSA ABLOY AB $21.92 87.9% $24,348.9 $27,115.5 $9,436.9 $1,741.2 18.5% 2.9x 15.6x dorma+kaba Holding AG $953.06 98.7% $3,999.0 $4,226.9 $2,455.5 $355.1 14.5% 1.7x 11.9x

Mean 17.0% 2.6x 15.2x

Median 16.5% 2.5x 15.9x

Harmonic Mean 16.4% 2.4x 14.9x

ALARM MONITORING: PUBLIC COMPANY TRADING & OPERATING DATA

Price % 52 Wk Market Enterprise LTM EV/LTM Company 9/6/17 High Cap Value Revenue EBITDA Margin Revenue EBITDA AlarmForce Industries Inc. $8.26 92.0% $95.2 $89.9 $45.4 $9.5 20.9% 2.0x 9.5x

Alarm.Com Holdings, Inc. $45.47 99.0% $2,123.8 $2,127.6 $297.8 $47.0 15.8% NM NM

Ascent Capital Group, Inc. $9.41 38.0% $116.0 $1,806.1 $565.1 $310.7 55.0% 3.2x 5.8x

Mean 30.6% 2.6x 7.6x EV = enterprise value; LTM = last twelve months $ in millions, except per share data Median 20.9% 2.6x 7.6x NM = Not Meaningful; NA = Not Available Harmonic Mean 23.2% 2.4x 7.2x

Capstone Partners LLC 5 Security Solutions Q3 2017

VIDEO SOLUTIONS: PUBLIC COMPANY TRADING & OPERATING DATA

Price % 52 Wk Market Enterprise LTM EV/LTM Company 9/6/17 High Cap Value Revenue EBITDA Margin Revenue EBITDA Avigilon Corporation $13.58 96.0% $595.0 $668.5 $377.7 $42.5 11.2% 1.8x 15.7x

Canon Inc. $34.88 95.6% $37,658.4 $39,094.4 $34,106.4 $5,033.3 14.8% 1.1x 7.8x

FLIR Systems, Inc. $38.18 98.0% $5,238.1 $5,340.5 $1,720.9 $365.0 21.2% 3.1x 14.6x

Mobotix AG $11.21 59.5% $147.3 $163.7 $82.6 NM NA 2.0x NM

Shenzhen Infinova Limited $0.97 69.4% $1,010.5 $1,051.1 $361.2 $6.8 1.9% 2.9x NM

Mean 12.3% 2.2x 12.7x EV = enterprise value; LTM = last twelve months Median 13.0% 2.0x 14.6x $ in millions, except per share data NM = Not Meaningful; NA = Not Available Harmonic Mean 5.5% 1.9x 11.5x

Public EBITDA Multiples: Historical Performance

20.0x

18.0x

16.0x

14.0x

12.0x

10.0x

8.0x

6.0x

4.0x

2.0x

0.0x Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17

Diversified IT Acess Controls Alarm Monitoring Video Solutions S&P 500

Source: Capital IQ as of September 6, 2017

Capstone Partners LLC 6 Security Solutions Q3 2017

THE SECURITY SOLUTIONS TEAM

Todd McMahon, Managing Director [email protected] • (617) 619-3334

Todd McMahon possesses over 20 years of transaction, financial services and corporate executive experience. Prior to Capstone, Todd was President of Array Financial Services, a Boston based boutique M&A advisory firm he founded in 2002. He began his career at Putnam Investments, later moving to Bank Boston’s investment banking group. Later, Todd served as Managing Director at Ross Crossland Weston/RCW Mirus, where he was responsible for managing the firm’s technology investment banking practice. Todd’s investment banking experience is complemented by his involvement as an entrepreneur and investor where he was involved in various consolidation transactions, raised over $30mm of debt and equity financing and was responsible for managing all aspects of operations. He earned his MBA from Boston University and his BA from the University of Massachusetts.

Peter Asiaf, Managing Director, Head of Business Development [email protected] • (617) 619-3368

Peter has more than 20 years of experience as a senior business development executive across the professional and financial services industries. He has been a growth-oriented leader in early stage, middle market and Fortune 500 enterprises, helping them to design and execute strategic expansion plans, optimize brand positioning and strengthen key market relationships. Prior to joining Capstone, Peter led two emerging growth firms focused on providing business and professional services to the financial, technology and healthcare industries. Peter also worked as a senior business development officer for Booz Allen Hamilton in McLean, Virginia where he was responsible guiding the firm’s re-entry strategy in various commercial markets. He was Executive Vice President of North America for Dextrys, a leading provider of IT services, and Vice President of Business Development at Darwin Partners, where he focused on expansion in the Technology, Telecommunications and Healthcare verticals. Peter spent his early career in the finance industry with Mellon Bank and The Boston Company.

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TAMPER-EVIDENT CUSTOM DESIGNER OF IT SERVICES & SECURITY PRODUCTS SECURITY SYSTEMS & SECURITY SYSTEM a portfolio company of MANUFACTURER PRODUCTS INTEGRATOR

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