For the last two decades, the Security Letter has been a benchmark document that puts the security guard industry into perspective. Each year Robert McCrie compiles data from the top security guard firms and produces what is called “the list” detailing the top 20-25 firms in the country. This year, Robert McCrie, Keith Oringer of Security ProAdvisors and Jeff DiDomenico of Trackforce Valiant made the list come to life – a great way for all of us in the business to see what’s new and different from last year to this year.
We thought we’d lend some analysis to the letter, as well as put some graphical elements to the list.
The Security Letter Shows a Consolidation Trend of the Security Guard Industry
If you were to take a Security Letter from even a few years ago, and hold it up to the 2019 edition, you will notice two things. The first is that there will be names missing from the list, and the second is that those missing names were most likely purchased or merged with the ones that remain on the list. Consolidation of the industry is a major theme in the security guard industry, with the big 5 at the top of the Security Letter working hard to acquire market share from others on and off this list. This isn’t limited to the companies listed at the top. When companies of various sizes are approached and acquired by larger firms, it shrinks the overall market and feeds into the top of the list.
What do the results mean for me?
It’s hard to say what consolidation can mean in the long term; yet, what we’ve noticed is that larger firms tend to bring in investment capital, training resources and technology, which ultimately guides the security guard industry toward improvement, as a whole. Many smaller firms retain their brand identity, so they tend to reap all the benefits and at the same time reduce the common financial risks as a small business. Therefore, it’s not a bad thing to get acquired, provided you are gaining value for your business and your clients in the process.
The Numbers: The Industry is Top Heavy in Revenue, and Bottom Rich in Number of Guard Firms
From a 2019 market financial perspective, the 22 companies on the Security Letter represent a combined revenue totaling $16 billion. Robert Perry’s recent paper this year positioned the entire global market for outsourced contract security to reach about $27 billion. So that’s about 60 percent of the contract Security market right here on this list. Drilling down, the top 5 security guard firms on this list make up 91 percent of that $16 billion. The overwhelming majority of security guard industry revenue come from 5 major companies. In this sense, the market is very top heavy in terms of revenue share.
As a counterpoint, it’s important to consider the number of U.S. based guard firms. Mr. Perry’s paper put the number of U.S. based Guard firms at about 8000 companies. We recently broke down this list in our own guarding outlook report this year and saw that 87 percent of the 8000 entities in the market is made up of security guard companies that have under 250 employees.
While we see a large portion of the overall revenue coming from the big 5, or even the top 25 guard firms, the majority of companies out there in the market are actually smaller to mid sized firms, making it a rich market full of opportunity for small companies to thrive.
Summary: Top Consolidation Gives Way for Opportunity
Being a unique subset of the larger security industry market, the Security Guard Industry has limited resources for fresh research and data on current market trends. There are a few resources to pull from, and having a benchmark to guage where the market stands is important. Robert Perry’s White Paper is one and the Security Letter is another. Being able to see this type of data gives us insight into a few findings:
- The Market Is Top Heavy in Revenue: When you have 5-10 companies that hold the majority of the market share, there isn’t that much their actions won’t influence their actions. Technology adoption, internationalization, acquisition strategies, or even service offering expansions will come from these leaders and will cascade down the market. It’s important to see what they are doing as it becomes a leading indicator for where the market will move next.
- The Market Is Consolidating at the Top: We’ve seen the large security firms begin to acquire more companies to increase their footprint, gain geographic markets, and/or bring in new technologies. The Security Letter now becomes a timestamp from year to year on who’s at the top and who’s been absorbed or left the game.
- Yet, the Small to Mid Market Still Thrives: Even with all these mergers and acquisitions, we still see a significant number of small to mid-sized companies making up a majority of U.S. companies.
Final Thoughts: Will there ever be a company to grow to the top 5 size ever again?
The more likely chance is that, once a company grows and scales to a noticeable level, they will become an attractive investment for the big boys. Companies in this area should think about their own growth and , and what they need to do to get to the next level.
The good news is that research on the Security Guard industry is getting more attention. The Perry White Paper and the Security Letter are just one resource. More resources are bringing valuable data to the industry, such as the Thinkcurity Learning Series, the Guarding Benchmark Report and a few others that are coming up. Knowledge is power – and as this industry continues to evolve, the need to have access to data becomes a powerful tool for business growth.