Acquisition Significantly Enhances ADT’s Scale in Commercial Market

Acquisition To Be Accretive to Operating and Free Cash Flow Generation; Meaningful Synergies Expected

Upon Completion of the Acquisition, Business Customers to Represent ~25% of Total Revenue

BOCA RATON, Fla., Oct. 25, 2018 (GLOBE NEWSWIRE) -- ADT Inc. (NYSE: ADT), the leading provider of monitored security and interactive home and business automation solutions in the United States and Canada, today announced it has entered into a definitive agreement to acquire Boca Raton, FL-based Red Hawk Fire & Security, a leader in commercial fire, life safety and security services and portfolio company of Comvest Partners, for $317.5 million in cash.

This transaction accelerates ADT’s growth in the commercial security market and expands the Company’s product portfolio with the introduction of commercial fire safety related solutions. It is the latest in a series of strategic acquisitions made over the last year to drive commercial growth and build on ADT’s strong foundation of superior customer service. With the addition of Red Hawk, ADT will have an increased geographic footprint and enhanced customer service capabilities across the nation. Revenues from the combined company’s business customers are expected to represent approximately 25% of total revenue.

Red Hawk is a leader in the design, installation, integration, monitoring and servicing of commercial fire, security and life safety solutions. Red Hawk represents one of the few last independent large national commercial integrators, offering complex, mission-critical solutions across its 45 district locations and is expected to generate approximately $300 million of revenues in 2018. In recent years, Red Hawk has demonstrated double-digit revenue growth across a diverse set of customers, markets and geographies, leveraging its strong local presence backed by its nationwide footprint and differentiated fire and security expertise.

“Commercial security is one of the core pillars of ADT’s growth strategy and today’s announcement marks a significant step in our concerted efforts to expand our commercial business with the critical capabilities and services that our customers expect,” said ADT President and incoming CEO, Jim DeVries. “Red Hawk’s exceptional portfolio of commercial fire and security solutions complements ADT’s existing commercial business, positioning us to provide a superior customer experience at a local and national level. We are excited to welcome the talented and experienced Red Hawk team to the ADT family while expanding our geographic reach, service capabilities and product offerings. Having long admired Red Hawk, we are confident that combining the strengths of our two companies will allow us to deliver increased value to our customers and shareholders.”

“We are delighted to join a company with ADT’s resources, growth potential and shared commitment to providing high quality customer service and innovative solutions to customers,” said Red Hawk President and CEO Michael McWilliams. “We look forward to our future with ADT, which we are confident will help us to achieve our next phase of growth.”

“It was a rewarding and collaborative experience working with Michael McWilliams, Mark Foley, Red Hawk’s CFO, and the other members of Red Hawk’s senior management team to build Red Hawk into a market leader from our original acquisition, and Red Hawk is positioned to continue to thrive under ADT’s leadership,” said Roger Marrero, the Managing Partner of Comvest Partners.

Strategic and Financial Benefits of Transaction

  • Substantial Increase in Scale to Accelerate ADT’s Commercial Growth: The combined commercial business will have substantially increased scale with an expanded commercial technician work force that will allow the Company to meet growing customer demand across the U.S. and provide enhanced customer service capabilities. This transaction creates the opportunity to leverage the capabilities of both organizations to create a more robust and differentiated commercial security offering in a highly fragmented industry.
     
  • Introduction of Fire Safety Solutions: This transaction expands ADT’s product portfolio with the introduction of Red Hawk’s fire safety solutions, allowing the Company to become a single destination for both fire and security needs at the commercial level. The Company intends to leverage Red Hawk’s fire safety solutions and expertise to help capture new business opportunities with new and existing customers.
     
  • Compelling Long-term Financial Benefits: Given the strong financial and operating profile of Red Hawk’s business – which, similar to ADT’s growing commercial and multi-site businesses, has very attractive net customer acquisition cost and retention characteristics – the acquisition is expected to be accretive to free cash flow generation, before taking into account meaningful expected cost benefits.

The completion of the transaction is subject to customary closing conditions, including regulatory approvals. The transaction is expected to close by the end of the fourth quarter 2018.

Transaction Advisors

Financing is being provided by Joint Lead Arrangers Barclays, Citigroup Global Markets Inc., Citizens Bank, Deutsche Bank and RBC Capital Markets, as well as Credit Suisse, Goldman Sachs and Morgan Stanley. Raymond James is serving as financial advisor to ADT, and Jefferies and Lincoln International are serving as financial advisors to Red Hawk. McDermott Will & Emery LLP is acting as legal advisor to Red Hawk. Morgan, Lewis & Bockius LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP are acting as legal advisors to ADT.

About ADT
ADT is a leading provider of security and automation solutions in the United States and Canada, protecting homes and businesses, people on-the-go and digital networks. ADT delivers same-day service and live answer within seconds in customer operations, making security more accessible than ever before, backed by 24/7 support, helping customers feel more safe and empowered. ADT is headquartered in Boca Raton, Florida and employs approximately 17,500 people throughout North America.

About Red Hawk Fire & Security
Red Hawk Fire & Security designs, installs, tests, inspects and maintains a broad portfolio of fire, life safety and security solutions using the latest technologies and advanced systems integration for enterprise level access control, video surveillance systems and physical security equipment. An industry leader with over 1,300 employees and a national footprint, the company serves commercial facilities in financial services, retail, education, healthcare and manufacturing. Red Hawk Fire & Security is headquartered in Boca Raton, Florida and their website is http://www.redhawkus.com.

About Comvest
Comvest Partners is a private investment firm providing equity and debt capital to middle-market companies across North America. Since its founding in 2000, Comvest has invested over $3.6 billion in over 170 companies. Today, Comvest’s funds have over $3.4 billion of assets under management. Through our extensive capital resources and broad network of industry relationships, we offer our companies financial sponsorship, critical strategic and operational support, and business development assistance. For more information, please visit www.comvest.com.

NON-GAAP MEASURES

Free Cash Flow

We define Free Cash Flow as cash from operating activities less cash outlays related to capital expenditures. We define capital expenditures to include purchases of property, plant, and equipment; subscriber system asset additions; and accounts purchased through our network of authorized dealers or third parties outside of our authorized dealer network. These items are subtracted from cash from operating activities because they represent long-term investments that are required for normal business activities. As a result, subject to the limitations described below, Free Cash Flow is a useful measure of our cash available to repay debt, make other investments, and pay dividends.  Free Cash Flow adjusts for cash items that are ultimately within management’s discretion to direct, and therefore, may imply that there is less or more cash that is available than the most comparable GAAP measure. Free Cash Flow is not intended to represent residual cash flow for discretionary expenditures since debt repayment requirements and other non-discretionary expenditures are not deducted. These limitations are best addressed by using Free Cash Flow in combination with the cash flow results according to GAAP.

FORWARD-LOOKING STATEMENTS 

ADT has made statements in this press release and other reports, filings, and other public written and verbal announcements that are forward-looking and therefore subject to risks and uncertainties. All statements, other than statements of historical fact, included in this document are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are made in reliance on the safe harbor protections provided thereunder. These forward-looking statements relate to anticipated financial performance, management's plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters. Any forward-looking statement made in this press release speaks only as of the date on which it is made. ADT undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. Forward-looking statements can be identified by various words such as "expects," "intends," "will," "anticipates," "believes," "confident," "continue," "propose," "seeks," "could," "may," "should," "estimates," "forecasts," "might," "goals," "objectives," "targets," "planned," "projects," and similar expressions. These forward-looking statements are based on management's current beliefs and assumptions and on information currently available to management. ADT cautions that these statements are subject to risks and uncertainties, many of which are outside of ADT's control, and could cause future events or results to be materially different from those stated or implied in this document, including among others, risk factors that are described in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission , including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein.

Contact
Investor Relations:
Jason Smith – ADT
investorrelations@adt.com

Media Relations:
Adam Feigen - ADT                                        
afeigen@adt.com