Building the Next Phase of Growth

What You Should Know

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How resilient performance, buy-and-build, product and services expansion and talent retention continue to shape the sector.

Members of Baird’s Fire Life Safety & Security team recently hosted Baird’s Fire, Life Safety & Security Dinner in London. The discussion highlighted a sector that maintains strong investor interest, continues to perform better than the broader market and has seen activity and valuations increase. Discussion also challenged the group to consider incremental areas for growth and the best way to retain talent.

Key themes discussed include:

Pockets of Strong Organic Growth

Organic growth has not been uniformly strong across the sector, but pockets of strong growth remain within certain segments of fire, life safety and security, supported by regulatory requirements, end-market demand and other tailwinds. The group therefore focused on (1) where to find higher levels of sustainable growth across the market and (2) what can be done to enhance growth through effective management.

Buy-and-Build Strategies Accelerating Across Europe

Bolt-on activity across fire, life safety and security has accelerated in recent years as investors back platforms with clear consolidation strategies. Since the last dinner, platform acquisitions have also become more prominent as larger groups absorb established platforms. Buy-and-build strategies remain more prevalent in services, given the high level of fragmentation, but also extend to product manufacturing. Investors continue to value the M&A opportunity, with platform consolidation becoming an increasingly important part of the sector’s evolution.

Opportunities for Diversification

Investors discussed diversification by geography and service line. Geographic expansion remains common among sponsor-backed platforms, while broader service offerings within existing markets are also gaining attention. European security platforms are becoming larger and increasingly pan-European, with security market growth outpacing fire and life safety in many markets. Signs of convergence between security and fire and life safety platform M&A valuations suggest investors increasingly recognize the opportunity. As platforms scale, service breadth is expected to increase, following many U.S. examples, with opportunities to capture synergies.

Technology and AI: Ongoing Adoption and Implementation

The market has universal agreement it is fully insulated from AI as a fundamental business risk and it is instead in a position to leverage data, technology, AI and other tools to improve efficiency and grow faster. Most companies are adopting AI tools at scale but the benefits realized remain at a relatively early stage and mostly at administrative cost saving level. It was noted there is substantially more potential in future with the right strategy. Data center customers are now viewed as a critical infrastructure end-market, making businesses serving this customer base highly sought after by sponsor-backed platforms and strategic acquirors alike.

Culture and Talent: Building the Capacity to Grow

Employee participation, retention and development remain high priorities with labor scarcity also identified as one of very few sector headwinds. The importance of culture is critical to success and operators are considering how employees participate in the business and how talent is developed as the organization expands. An optimal growth plan needs the workforce capacity to deliver it.

Connect with Baird’s Fire Life Safety & Security team to discuss these themes and the opportunities ahead in fire, life safety and security.