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2024 The State of the Security Industry

ARDENT’s In-depth White Paper Analysis

Introduction: Navigating a Period of Transition

In recent times, the security industry has faced new challenges, predominantly marked by an uptick in crime rates, including mass shootings and politically fueled disturbances. This era is characterized by the industry’s response to evolving market dynamics, shifting client expectations, and innovative operational Methodologies. The industry’s resilience is being displayed as it adapts to these changes, ensuring a safer and more secure future in an ever-evolving global security landscape. Join us as we explore these comprehensive insights and discuss their implications for our industry’s future.

Growth Amidst the Challenges

Data Highlights:

  • U.S. Market Valuation: Approximately $33 billion; a $2 billion increase from the previous year. 
  • Top 26 Companies: Their combined revenues approach $29 billion, accounting for nearly 90% of the U.S. market.

 

Despite facing challenges, the North American contract security market has exhibited remarkable growth and resilience, ascending to a valuation of approximately $36 billion. This substantial growth is primarily fueled by increased billing rates for existing customers and strategic market acquisitions, reflecting a strong trend towards market consolidation and sustained stability. The market’s robustness, especially in turbulent times, underscores the essential nature of security services and their increasing importance in today’s societal context.

Transition and Margin Restoration

Data Highlights:

  • Employment Growth: Notably modest at a 2% increase, bringing the total number of employed within the sector to 850,000 for the year 2023.

 

The security industry is making concerted efforts to recalibrate and restore profit margins to levels seen prior to the pandemic. This phase of transition is marked by a strategic push towards increasing billing rates and enhancing operational efficiencies. While larger corporations have reported significant boosts in revenue, smaller entities proceed with caution, aiming to strike a delicate balance between retaining customer loyalty and achieving viable profit margins. This period of adjustment is indicative of the sector’s broader economic recovery and the strategic shifts necessary to navigate the post-pandemic landscape.

Expanding Beyond Traditional Security

Data Highlights:

  • Non-traditional Revenue: Notably, approximately $3.6 billion or 10% of the market stems from technological and non-traditional services.

 

The security industry is undergoing a transformative evolution, extending its reach beyond traditional manned guarding services to embrace technological integration and a broader array of service offerings. This pivotal shift not only addresses the pressing challenges associated with labor shortages but also aligns with the dynamic security requirements of modern clients. The move towards scalable, technology-driven solutions signifies a critical evolution in the industry’s approach to meeting the complex and varied security needs of today’s world.

Future Outlook: Adapting to New Realities

Data Highlights:

  • Potential New Business: An impressive $15 billion lies in companies presently utilizing in-house security solutions.
  • Outsourced vs. In-house: There’s a noticeable trend towards the preference for outsourced security personnel over traditional in-house methods.

 

The future of the security industry is shaped by a confluence of factors including rising demand, socio-economic shifts, and emerging markets such as the burgeoning cannabis sector. While the industry continues to grapple with the complexities of adapting to these new realities, including navigating labor shortages and margin pressures, these evolving dynamics present unique opportunities for growth, innovation, and sector-wide transformation, particularly through the integration of advanced technologies and the diversification of service offerings.

Small vs. Regional Company Dynamics

Data Highlights:

  • Small Companies: Typically with revenues less than $10 million, some of these firms are navigating increased margin pressures.
  • Regional Companies: With revenues ranging between $10 and $100 million, these organizations are experiencing a period of transition marked by gradual financial improvements.

 

The contrasting experiences between small and regional companies highlight the diverse impact of market changes across different scales of operation. Small companies face heightened challenges in an increasingly competitive landscape, while regional companies, with their broader operational footprint, appear better positioned to adapt to market dynamics, benefiting from gradual improvements in billing rates and financial health.

The Investment Landscape

The Investment Landscape

Data Highlights:

  • Investment Multiples: Currently ranging from 6X to 12X EBITDA.
  • EBITDA Margins: Spanning between 4% and 10%, with entities focused on technology positioned at the higher end of this spectrum.

 

The investment climate within the security sector remains vigorous and forward-looking, with a pronounced emphasis on smaller, technology-oriented firms. This prevailing trend sheds light on the sector’s shift towards innovation, scalability, and technological sophistication, reflecting broader industry trends where tech-driven solutions are increasingly valued. The dynamic investment landscape showcases the industry’s commitment to embracing change and fostering growth through technological advancement and strategic capital deployment.

Moving Forward with Confidence

As the security industry forges ahead, it encounters a landscape filled with many opportunities. Embracing technological advancements, expanding service portfolios, and responding to the evolving needs of clients are pivotal strategies for navigating the complexities of today’s market. By staying true to our core values while adapting to changing market dynamics, the security sector can continue to provide effective, efficient, and professional solutions, reinforcing its essential role in maintaining public and private safety in an uncertain world.

Conclusion

This blog serves as ARDENT Protection’s effort to interpret and share the pivotal insights from their comprehensive research with our industry colleagues and partners. We extend our gratitude to Robert H. Perry & Associates for their foundational research, which serves as a crucial resource for understanding the market’s current state and trends. Our objective here is to dissect and interpret their work to foster greater clarity and engagement within the security sector, and never to represent their research as our own. 

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