Volume 142

While others rushed to comment after Bloomberg broke the news, for some reason, I took a breath to think it through. And after a long run, I packed up for a flight home, and then a long sit at the airport to gather my thoughts on JCI.

Bloomberg reported Johnson Controls might sell its access control and intrusion detection units for around $4.5B. This has been in motion for six months and is no surprise, considering prior moves, such as selling their residential HVAC business, Triton acquiring Keenfinity from Bosch, and Carrier selling LenelS2 to Honeywell for a similar price. The real question I wanted to answer is, why did it take so long?

But before we get into that, I wanted to share what do I think, who could potentially acquire it, and what's interesting about this? Here is how I see it…

There are two likely buyers: a strategic (like Motorola, which I’ll explain) or a PE firm like Triton. Forget about Honeywell (for obvious reasons), and a Chinese buyer is unrealistic given regulatory constraints. As an aside, imagine if Hanwha or Hikvision had acquired it or even Milestone as suggested in the PhySec Collective (that would be interesting).

Motorola makes strategic sense because the install base of JCI is their true IP, if you will, and think of it as a distribution asset more than a revenue asset. They could walk into thousands of enterprise accounts that Avigilon Alta (and all of the communications products) is currently trying to sell into from the outside. It would be the opposite play they did with Openpath, where they plugged the “we are moving because you don’t have a reasonable cloud solution and we are tired of hearing it's on the roadmap” hole of attrition. The migration path from Software House and Kantech to Alta over five to seven years is (squints) feasible, and maintenance revenue alone could fund it. The part I don't like is that they'd be buying a channel-dependent, installer-driven business at the exact moment they're trying to build a cloud-native one and do things differently. I also don't like it because it's not as easy as everyone would like it to be. I also find it lacking imagination, and it is a sign of an incremental mindset versus exponential…if it were to happen.

But here is something people are undervaluing in this conversation. JCI has a direct sales force and field service organization that has been calling on these Software House and Kantech accounts for years. You cannot just look at it as an install base. You are better off framing it as relationship infrastructure. And, as we have seen, a new owner does not automatically get that. The reps and field techs who hold the actual customer relationships may not stay, may not be motivated to stay, or may get absorbed into a structure that breaks what made those relationships work in the first place. That is a real vulnerability that nobody in the deal room is pricing correctly. The flip side is also true. A buyer who is smart about it could use that sales org and field coverage as an active asset, not just a passive one. Leverage stickiness and slow attrition by using existing market coverage to introduce something better to accounts that already trust the name on the badge. That is something like what Rhombus seems to be doing with Honeywell LenelS2 (more to come on this later). The distribution infrastructure is the value.

A PE firm would be interested in many of the reasons Triton was attracted to Acre, or why the Bosch acquisition happened: a sticky install base, reliable service contract revenue, and significant potential to increase ARR through targeted investments and stronger go-to-market efforts. In addition, the intrusion market, with assets like DSC and Qolsys, already operates on a recurring revenue model, which is attractive for predictable returns.

All that said, I go back to this: everyone evaluating this deal is doing it through a $10B lens, and I hate it. Install base retention, EBITDA margins, ARR conversion, and whether they can push growth from 5-8% to 12% is probably exactly how they are looking at it. Within that, I can see how the deal probably works. Get someone with discipline, be a good operator, and you can make money here, given the time horizons, institutional norms, and the reality that forklifting in this industry moves slower than the transformation narrative implies, or I want to admit.

But I do think that framework is asking the wrong question, and the rate of deceleration is more than people want to admit (I have 100 examples).

There is also a distinction worth making here that our industry consistently blurs: having scale and scaling the business are not the same thing. Companies in this industry constantly confuse the two. Having a global field org, thousands of integrator relationships, and billions in assets looks like scale. It is not. Scale is when your unit economics improve as you grow, your addressable market expands, and you acquire new customer categories at an accelerating rate. By that definition, I can only think of one company in our industry that has actually scaled quickly: Verkada. Everyone else has been managing what they have and calling it growth or building it from scratch but not quickly. Buying JCI security does not give you scale. It gives you size. Those are not the same thing, and the deal math should reflect that.

Software House, Kantech, and DSC are assets in a shrinking share of a $10B cottage industry, full stop. They are not assets; they are just out of the box, in the $100B mainstream market that is forming around them. Verkada and others like them are not trying to convert the Software House install base. Sure, some, but not all. They are going around it, selling to buyers who never had Software House to begin with or are done dealing with it. That is the $100B mindset, and it has a completely different growth curve and buyers.

JCI security is appealing to buyers who believe the existing cottage industry can continue generating value for the next 10 to 15 years, making it more attractive to established players like Motorola or traditional PE firms looking to maximize value within that window. Conversely, it is less attractive to buyers focused on transforming the industry for the future, which explains why tech-driven or disruptive companies may not pursue it.

Ultimately, the real opportunity for a buyer is not simply to maintain the status quo or stretch incremental growth from the existing install base, but to actively drive transformation from within. If a progressive PE firm enters with a clear strategy to evolve rather than just extract, this acquisition could reshape the segment over a decade. The next chapter for JCI security will be written by whoever sees beyond preservation and is willing to build what comes next.

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