Why We Think Security and Alarm Companies Are a Great Acquisition for Accredited Investors
TL;DR: Electronic security companies (alarm monitoring, video surveillance, access control, and the installers who put it all in) are one of the few small business categories valued primarily on contracted recurring revenue. The industry prices these businesses as a multiple of recurring monthly revenue (RMR), commonly around 26 to 36 times monthly RMR for residential books and 32 to 42 times for commercial. Demand is driven by insurance requirements, code, and fear, none of which go away in a recession. The largest residential operator in the country, ADT, reported $359 million in monthly RMR and 13.1 percent annual revenue attrition for 2025, which tells you both the size of the prize and the central risk. The supply side is fragmented and actively consolidating: Pye-Barker Fire & Safety alone closed 22 acquisitions in the first half of 2026. Our lean is commercial or mixed books over pure residential, because commercial attrition runs roughly half of residential and the RMR trades at a premium. Below is the full thesis, the attrition math, a comparison against other categories we like, and the risks we would underwrite before signing an LOI.
Why do we like security and alarm companies for accredited investors?
Most small businesses sell you last year's earnings and a promise that customers will come back. A well-run alarm company sells you a signed contract that bills every month whether the owner shows up or not.
That is the whole appeal in one sentence. A monitored security account is a small annuity. The customer pays a monthly fee for central station monitoring, cellular communication, video storage, or remote access, and in most cases that fee is on autopay, on a multi-year agreement, and tied to hardware that is physically bolted to the building. Switching providers means a truck roll, new equipment, and a new contract. Most customers do not bother.
Stack the other things we look for on top of that:
- Non-discretionary demand. Commercial property insurers, landlords, lenders, and local code frequently require monitored intrusion or fire systems. Residential demand is driven by insurance discounts and, bluntly, by the fact that people do not stop being afraid of break-ins during a downturn.
- Recurring revenue the market actually pays for. This industry invented its own valuation metric around recurring revenue. You are not arguing with a buyer about whether revenue is "sticky." There is a standard multiple for it.
- A fragmented supply base. Thousands of local and regional dealers, many owned by a founder who started as a technician in the 1990s and never built a management layer.
- Active strategic and private equity buyers at the top. The exit path is not theoretical. It is a line of consolidators with acquisition teams.
When a category checks all four, it earns a thesis. This one does.
What counts as a security company in this thesis?
We are talking about electronic security, not guard services. Specifically:
- Residential alarm dealers. Intrusion panels, door and window sensors, smart home add-ons, and 24/7 monitoring for homeowners.
- Commercial alarm and monitoring companies. Intrusion, panic, and environmental monitoring for small businesses, retail, offices, and industrial sites.
- Video surveillance and remote video monitoring. Camera systems plus cloud storage, and increasingly live or event-based remote video monitoring that replaces a guard on a car lot or construction site.
- Access control integrators. Card readers, door hardware, and cloud access platforms for multi-tenant and commercial buildings.
- Fire alarm adjacency. Many security dealers also install and monitor fire alarm systems, which brings code-mandated inspection revenue with it.
Guard companies are a different business with different economics: labor-heavy, thin-margin, and priced per hour. We are not covering them here.
How does a security alarm company actually make money?
Three revenue streams, and a buyer values each one differently.
1. Installation and project revenue. The company sells and installs the system. For residential, the install is often discounted or nearly free because the real product is the contract. For commercial, installs can be meaningful project revenue: a multi-door access control job or a 40-camera surveillance system is a real invoice with real margin. Project revenue is lumpy and valued like any trade business.
2. Recurring monthly revenue (RMR). Monitoring, cellular communication fees, video cloud storage, hosted access control, and remote video monitoring. This is the asset. It is billed monthly, usually on contract, and carries high gross margin because the marginal cost of monitoring one more account is small, especially if the company contracts with a wholesale third-party central station rather than running its own.
3. Service and inspection revenue. Maintenance agreements, repair calls, battery and sensor replacements, and, where fire alarm is in the mix, annual code-required inspections. This sits between project revenue and RMR in how buyers value it.
The strategic insight is that the install is the customer acquisition cost and the RMR is the product. A residential dealer that installs a system at a loss to sign a 36 or 60 month monitoring contract is not being generous. It is buying an annuity at wholesale.
What does the attrition math look like?
This is the single most important section in the thesis, because attrition is the entire deal.
Here is an illustrative residential book. The numbers are hypothetical and exist to show the calculation, not to describe any real business.
| Input | Illustrative residential book |
|---|---|
| Monitored accounts | 800 |
| Average RMR per account | $45 |
| Total monthly RMR | $36,000 |
| Annualized recurring revenue | $432,000 |
| Assumed purchase multiple | 30x monthly RMR |
| Price for the RMR base | $1,080,000 |
| Annual revenue attrition | 13 percent |
| RMR remaining after 5 years with zero new sales | ~$17,900 (about 50 percent) |
Read that last row twice. At 13 percent annual attrition, roughly ADT's reported 2025 figure, a book with no new sales loses about half its RMR in five years (0.87 to the fifth power is roughly 0.50). You are buying a decaying annuity. Your job as the operator is to replace what walks out the door every month, and then some.
Now run the same book at commercial attrition. At 6 percent annual attrition, the same five-year runoff leaves about 73 percent of the RMR in place (0.94 to the fifth power is roughly 0.73). That gap, 50 percent versus 73 percent retained, is why commercial RMR trades at a premium and why we lean commercial.
Two more numbers worth keeping in your head:
- Revenue payback. ADT reports how long it takes to recover the cost of creating a new account from that account's revenue. For 2025 it was 2.3 years. A small dealer with worse purchasing power and less efficient sales will usually be longer. If a target cannot tell you its own creation cost per dollar of RMR, that is a finding.
- Creation cost is rising. Michael Barnes of Barnes Associates, which tracks deal data across the alarm industry, has flagged the rising cost to create new RMR as the most concerning metric in the industry. That cuts both ways. It makes organic growth harder and makes acquired RMR relatively more attractive, which is part of why consolidators keep buying.
If you want the underlying frameworks, our guide to 5 methods of valuation every business buyer should know covers how to triangulate an earnings approach against a recurring revenue approach, which matters more here than in almost any category we cover.
Should you buy a residential or commercial security company?
Both can work. They are different businesses wearing the same logo.
| Dimension | Residential alarm dealer | Commercial security / integrator |
|---|---|---|
| Typical RMR per account | ~$25 to $45 per month | ~$50 to $100 per month |
| Annual attrition | ~10 to 14 percent | ~4 to 8 percent |
| Typical RMR multiple | ~26x to 36x monthly RMR | ~32x to 42x monthly RMR |
| Main churn driver | Moves, price, DIY substitution | Business closures, relocations |
| Install revenue | Small, often subsidized | Meaningful project revenue |
| DIY competition | High (Ring, SimpliSafe, and similar) | Low |
| Technical complexity | Low to moderate | Moderate to high (access control, video, fire) |
| Cross-sell potential | Smart home, video | Video monitoring, access, fire inspection |
| Consolidator appetite | Dealer programs and bulk account buyers | PE-backed integrator platforms |
Our read: pure residential books are the most commoditized part of the market. You are competing with national brands on marketing and with DIY kits on price, and your customers move. Commercial books are harder to operate because they require real technical talent, but the customers churn less, pay more per account, and buy more services over time. A mixed book, commercial-weighted with a residential base, is often the best of both: stable commercial RMR plus a residential base you can keep harvesting.
How do security companies compare to other acquisition targets?
Here is how the category stacks up against others we have written about.
| Dimension | Security and Alarm | Temporary Fence Rental | Property Management | Fire and Life Safety Inspection |
|---|---|---|---|---|
| Revenue type | Contracted monthly RMR | Monthly, duration-extending | Recurring, contracted | Annual, code-mandated |
| Capital intensity | Low to moderate | Moderate | Very low | Low to moderate |
| Primary valuation method | Multiple of monthly RMR | Multiple of SDE plus assets | Multiple of SDE | EBITDA plus recurring premium |
| Demand driver | Insurance, code, fear | Permit mandated | Rental housing demand | Fire code mandated |
| Annual customer churn | ~4 to 14 percent | Project based | Moderate | Low |
| Asset value floor at exit | The contracts themselves | Yes (steel) | No | Partial |
| Roll-up potential | Strong | Strong | Strong | Very strong |
| Cyclicality | Low | Moderate to high | Low | Low |
| Technician dependency | High | Low | Low | High |
The honest comparison with our fence rental thesis: fence rental gives you hard steel as a floor. Security gives you contracts as a floor, and contracts are both better and worse. Better because they bill automatically. Worse because they can walk away at 13 percent a year if you neglect them. Compared with our property management thesis, security has similar recurring economics but a much deeper and more liquid buyer market at exit, because the industry already agrees on how to price it.
What multiples do security and alarm companies sell for?
This is the part where you pay up, and you should know that going in.
RMR multiples. M&A advisors active in the sector put 2026 residential alarm portfolios at roughly 26 to 36 times monthly RMR and commercial alarm and access control at roughly 32 to 42 times, with quotes as high as 35 to 50 times for residential books on multi-year contracts and 40 to 55 times for large commercial fire and burglar. Treat these as advisor commentary rather than published data: the industry's long-running valuation study, the Barnes Buchanan conference, does not publish a publicly available multiple table, and Barnes Associates announced at the 2026 conference that it is stepping back, with Raymond James taking over. National consolidators buying through dealer programs tend to sit at the lower end of any range, while regional and PE buyers pay more for clean operating platforms. What the 2026 conference did put on the record is the health of the underlying business: a 6 percent industry CAGR from 2020 to 2025, and average margin on monitoring and services back up to 51.2 percent after eight years of decline.
A useful translation: 30 times monthly RMR equals 2.5 times annual recurring revenue. If that sounds rich for a small business, remember that the RMR carries high gross margin and the buyer universe is deep.
EBITDA multiples for integrators. Commercial integrators that do real project work are often valued as a sum of parts: the project business at a trade-business multiple and the RMR base on top. Regional integrators doing $2 million to $5 million of EBITDA with real recurring service or monitoring revenue have been quoted around 5.5 to 8.5 times EBITDA, and platform-grade companies at $3 million to $10 million or more reach 8 to 11.8 times. Commercial security integration generally bands at 4 to 8 times, rising to 7 to 11 times and above where the recurring mix is meaningful. Owner-operated shops below that trade on SDE instead, where smaller alarm companies with recurring revenue as the dominant model can still reach 5 to 6 times.
What moves the multiple. Attrition, contract terms, whether the company owns its accounts or just monitors someone else's, the communicator technology in the field, and whether the RMR is actually on autopay under an assignable contract.
The takeaway: you will rarely buy a good alarm company cheap. The opportunity is not multiple arbitrage on the RMR itself. It is buying an under-managed book, reducing attrition, raising price, adding services, and selling a larger, cleaner, commercial-weighted platform to a buyer who pays a platform multiple.
Is security a good fit for a roll-up, and who buys at exit?
Yes, and the buyers are already visible.
Pye-Barker Fire & Safety reported 22 acquisitions in the first half of 2026, after moving up to number three on the SDM 100, and closed 57 in 2025. Recent Pye-Barker targets include pure security and monitoring companies, not just fire. Everon, the former ADT Commercial business now owned by GTCR, has been buying regional integrators, including a New York security and fire alarm company and a New England banking security specialist. Guardian Alarm, RapidFire Safety & Security, and a long list of PE-backed integrator platforms are active too.
Barnes has also noted that the combined local and regional share of the alarm market has fallen from roughly 50 percent in 2016 to 34 percent in 2025. That is slow, steady consolidation, which is exactly the environment where an independent buyer can build something and sell it upstream.
The buy-and-build logic is straightforward:
- Central station leverage. Wholesale monitoring pricing improves with volume. Moving acquired accounts onto one central station contract cuts per-account cost.
- Technician density. Service calls and inspections get cheaper as account density rises within a route.
- Cross-sell. Residential intrusion customers can add video. Commercial intrusion customers can add access control, remote video monitoring, and fire inspection. Each add-on increases RMR per account and lowers attrition, because a customer with three services is much harder to dislodge than a customer with one.
- Platform premium at exit. A regional platform with clean RMR reporting, documented attrition, and a commercial mix is a different asset than five tired dealers, and it gets a different multiple.
Same discipline as fence rental: buy contiguous. Two alarm books 300 miles apart share almost nothing. Two books in the same metro share a technician bench, a central station contract, and an office.
Where is the value creation after you buy?
The typical target is a 20 or 30 year old dealer where the owner is the top salesperson and the lead technician. The gaps tend to repeat:
- Contracts that expired into month-to-month. Re-papering customers onto current agreements with auto-renewal and assignment language adds value you can prove in diligence at exit.
- Pricing that has not moved in years. ADT's own monitoring revenue growth in 2025 was driven mainly by higher average prices, not volume. Small dealers often have the same opportunity and never take it.
- Legacy communication technology. The retirement of copper phone lines and older cellular networks forces equipment upgrades. In March 2026 the FCC removed the federal approval process carriers needed to retire copper lines, so a carrier can now give as little as 90 days' notice, and AT&T began discontinuing copper service in June 2026 with full retirement targeted by 2029. There is no single national cutoff; it is a rolling, market-by-market process, which means the exposure in any book depends on where its accounts are. Handled well, that upgrade is a chance to replace old panels, renew the contract, and add services. Handled badly, it is an attrition event.
- Video and remote monitoring. Adding cloud video, and especially remote video monitoring for car lots, construction sites, and yards, raises RMR per account substantially.
- Manual billing and collections. Moving customers to autopay reduces involuntary churn, which is a real and often ignored slice of attrition.
What are the risks of buying a security company?
We would not publish a thesis without the other side of it.
Attrition is the big one. Everything in this thesis depends on it. Pull at least three years of monthly account-level data and calculate attrition yourself, by cohort, by account type, and by reason. Sellers routinely present net attrition (after new sales) when you need gross. If attrition is accelerating, the multiple is wrong.
RMR is not always what it says it is. RMR definitions vary. ADT's own definition includes contracts it monitors but does not own, which is a good reminder that the headline number needs to be decomposed. Is the RMR on accounts the company owns outright? Is any of it wholesale monitoring for other dealers? Are there accounts past due or in collections still being counted? The industry has specialist firms that do field exams to verify RMR for exactly this reason.
Contract assignability and quality. If the contracts do not allow assignment to a new owner, or if a large share are expired and month-to-month, you are buying relationships, not contracts. Read a statistically meaningful sample of actual agreements, not the template.
DIY competition on residential. Self-installed systems with optional professional monitoring have put permanent price pressure on residential monitoring. A residential-only book competing on price is a slow squeeze.
Licensing and technician scarcity. Most states license alarm companies and often individual installers, and license transfer can add time to a close. Licensed fire and low-voltage technicians are scarce and expensive to replace. If two technicians carry all the knowledge, underwrite what happens when one leaves.
Liability. Alarm companies carry real liability exposure when a system fails during a break-in or fire. Standard agreements include limitation of liability clauses. Confirm they are in the actual contracts, confirm the E&O coverage, and review claims history.
Hardware compliance on commercial and government accounts. Federal procurement rules restrict certain camera manufacturers, and some integrators have installed banned equipment on accounts that are now a problem. Inventory the installed base on any government or government-adjacent customer.
Technology obsolescence. Every network sunset turns part of the installed base into a forced upgrade. Know what communicators are in the field before you price the book.
Owner dependence. Same story as every small business we underwrite. In security it shows up as the owner holding the largest commercial relationships personally and being the only person who knows why certain accounts are billed the way they are.
How would we underwrite a security company acquisition?
A practical sequence:
First, rebuild RMR from the billing system at the account level. Tie it to bank deposits. Exclude anything past due beyond 60 or 90 days, anything monitored but not owned, and anything not under a signed agreement, then price what is left.
Second, calculate gross attrition by cohort for at least three years. Separate voluntary cancellations, moves, non-pay, and business closures.
Third, review the contracts. Term, auto-renewal, assignment, limitation of liability, and price escalation language. Sample actual signed agreements.
Fourth, inventory the installed base. Panel types, communicators, cameras, and anything on a network scheduled to sunset.
Fifth, review the central station agreement, the licensing for the company and technicians, and insurance and claims history.
Then underwrite your own value-creation case in numbers. How many attrition points can you realistically take out, what is a price increase worth, and how much RMR per account can you add with video or access control? If the price you are paying reflects a tired residential book and your plan reflects a commercial-weighted platform, that spread is the deal.
If you are new to running this process, our guide on how to buy a small business as an accredited investor walks through the sequence. And because many of the best local dealers have never been listed, off-market outreach is often how they get found. Accredited Pro lets you search more than 76,000 deduplicated listings across 12 marketplaces for security and alarm businesses, set alerts for new ones, and surface off-market owners in the metros you care about.
Frequently Asked Questions
How are security alarm companies valued? Primarily as a multiple of recurring monthly revenue (RMR), the contracted monthly fees for monitoring, communication, video, and hosted services. Industry ranges commonly cited for 2026 run about 26 to 36 times monthly RMR for residential books and about 32 to 42 times for commercial. Larger integrators with project revenue are often valued on EBITDA, with the RMR base valued separately on top.
What is a good attrition rate for an alarm company? For residential books, annual revenue attrition around 10 to 14 percent is typical, and ADT reported 13.1 percent for 2025. Commercial books commonly run about 4 to 8 percent. Buyers pay more for lower attrition and will reduce the multiple or require holdbacks tied to RMR retention when attrition runs high.
Is residential or commercial security a better acquisition? Commercial books generally churn less, bill more per account, and support more cross-selling of video, access control, and fire inspection, so they tend to trade at higher RMR multiples. Residential books are simpler to operate but face more price pressure from self-installed systems. Many buyers prefer a commercial-weighted mixed book.
Who buys security and alarm companies? National residential providers and dealer programs buy account portfolios, while private equity backed platforms such as Pye-Barker Fire & Safety and Everon buy operating companies and integrators. Pye-Barker reported 22 acquisitions in the first half of 2026 alone, and the combined local and regional share of the alarm market has fallen from roughly 50 percent in 2016 to 34 percent in 2025.
Is alarm monitoring revenue recession resistant? Largely, yes. Monitoring fees are contracted, usually on autopay, and often required by insurers, landlords, or code. Installation revenue is more cyclical because it tracks construction and home sales, which is why buyers value recurring and project revenue separately.
What is the biggest risk in buying a security company? Attrition. A book with 13 percent annual attrition and no new sales loses about half its RMR in five years. The second biggest risk is overstated RMR, such as counting accounts that are past due, not under contract, or monitored for other dealers rather than owned.
Can you use an SBA loan to buy a security alarm company? Security and alarm businesses are generally eligible for SBA 7(a) acquisition financing, subject to standard SBA requirements on equity injection, personal guarantees, and seller notes. Note the rules are mid-change: SOP 50 10 8.1 takes effect on 1 October 2026 and applies to applications issued a loan number on or after that date, while anything submitted through 30 September 2026 stays under SOP 50 10 8. Under the current rules an initial acquisition carries a mandatory 10 percent minimum equity injection, and a seller note only counts toward that injection if it is on full standby for the life of the SBA loan and makes up no more than half the injection. Lenders will look closely at RMR quality and attrition, since those drive cash flow coverage.
Disclaimer
This article is for informational and educational purposes only. It is not investment, legal, tax, or financial advice, and it is not a recommendation to buy or sell any business or security. Accredited is a publisher, not a broker-dealer, investment adviser, or licensed M&A intermediary. Business valuations, RMR multiples, attrition rates, and market figures cited here are general industry references drawn from third-party sources and public company filings that vary by deal, geography, and time, and should not be relied on for any specific transaction. The unit economics illustration in this article is hypothetical and is provided to demonstrate a calculation method, not to project the results of any business. Alarm and low-voltage businesses are subject to state and local licensing, alarm ordinance, and consumer contract requirements that vary by jurisdiction. Conduct your own due diligence and consult qualified legal, accounting, and insurance professionals before pursuing any acquisition.