Analysis 10 JUL 2019

Once a very sleepy business, 911 centers are seeing a surge of investment lately.

“A lot of VC money is coming into the market,” said Robert Chefitz, managing partner of security-focused private equity firm Egis Capital.

According to Mergermarket data, the subsector saw 10 deals in the last three years—more than in all prior years. The USD 237m acquisition of Plant Holdings by Motorola Solutions [NYSE: MSI] in July 2017 was one example. Motorola, Intrado and Allegiance Mobile Health each completed at least two acquisitions over that span.

The centers are now attracting new technology including cloud, internet of things and 5G, which will redefine the security landscape that includes the 911 and Public Safety Answering Point industry, Chefitz said.
Demand for strong cybersecurity around the industry has grown as threats have increased.

Last year marked the 50th anniversary of the 911 system. A lot has changed since the system was launched, when there was one phone company – AT&T [NYSE: T] – controlling all phone lines, Chefitz noted. Fire, police and ambulance radio communications were all controlled by Motorola. He said AT&T made USD 500m of revenue just for managing a database keeping track of addresses and phone numbers nationwide.

Now, by contrast, there are hundreds of phone companies – landlines, voice over internet protocol and cellular. Landlines represent less than 50% of the total, he added.

Venture capital-backed RapidSOS is a provider of technology services to 911 operators, Chefitz said. Another player is Mission Critical Partners, which Egis acquired in January 2018 to serve as a platform in the space. Others include Intrado, owned by Apollo [NYSE: APO]; Comtech [NYSE: CMTL], which acquired the 911 business of General Dynamics [NYSE: GD]; and Motorola, which bought the 911 assets of Airbus[EPA: AIR], Chefitz added.
“There’s a lot of similar technology to command and control in defense that’s crossing into the 911 space,” Chefitz noted.

Among other venture capital-backed businesses, Chefitz pointed to Israel-based Carbyne, which is raising its second round of capital. The first round was provided by Founders Fund. Another is Rave Mobile Safety, which received funding from Technology Crossover Ventures, he said.

Vernon Guillermo, CEO of Agile, a first responder communications company, said via email that he is not seeing much pure M&A but rather strategic partnerships around the 911 space. He noted that FirstNet, which was established in 2012 by Congress, is a new industrywide effort to make traffic on cell phone networks prioritized for emergency communications. Other carriers will follow suit and will be developing their own dedicated networks for first responders.

FirstNet’s nationwide broadband network was created by AT&T under a 25-year contract with the First Responders Network Authority that was awarded in 2017.

Because this is still a developing and growing market, companies are aligning with peers to bridge technology gaps necessary to offer comprehensive solutions to first responders. For example, Guillermo said companies that are radio- or cellular-centric communications need interoperable solutions so that they can communicate directly and securely with each other. Similarly, companies that require the transfer of large amounts of data such as streaming live video need a reliable conduit source that has the capacity to handle large amounts of data.

“Perhaps in the near-term future there will be more M&A activity as sales and opportunities start to plateau,” said Guillermo.

Zello, the maker of a free app for consumers, is widely used by first responders in natural disasters and other emergencies, said Bill Moore, CEO of the Austin, Texas-based company. Although the company’s revenue model focuses on the business-to-business market, it makes the Zello consumer app available free for first responders as a goodwill gesture. “We don’t have a presence with government organizations. This does a lot of good and helps our competitive position,” he said.

Other technologies around emergency communications include helmets that function in loud environments, and rugged devices for tough environments such as phones produced by companies like San Mateo, California-based Sonim Technologies. On 19 April, Sonim launched an XP3 Flip Phone that works on FirstNet’s Band 14 network.
by Marlene Givant Star and Joshua Armstrong, with analytics by Lana Vilner

Joshua Armstrong
Southeast U.S. bureau chief
Acuris
Charlottesville, VA