U.S. Contract Security Industry 2020 Review and 2021 Outlook

Robert H. Perry & Associates Inc.

Here’s what happened to the market in 2020…

In gathering our information for this report, we interviewed owners of contract security companies mainly throughout the U.S. with revenues between $10 million and $400 million. Our main question was: what effect did the pandemic have on revenues for 2020? As expected, we got a wide range of answers that depended on the mix of business and the geographic area being serviced. For the most part, companies with a large percentage of their business coming from aviation, public events, hospitality, rental car agencies, educational institutions and in-store shopping locations reported a decline in revenues from these sectors. These companies, as well as companies that do not have customers in these sectors, reported significant growth in their revenue starting around the first of the third quarter mostly coming from the concerns over the civil and political unrest and the continuing need to provide the high margin COVID work. Some reported getting business from their larger competitors, but this aspect was not as prevalent as in our previous reports.

The 2020 year certainly tested the U.S. manned guarding market that, as in previous years when our country experienced economic challenges, continues to respond with resilience.  In spite of starting the year with a dip in revenues, the industry rebounded with continued growth through the end of the 2020 year in a time when most businesses in the U.S. are still experiencing declining revenues and profits.  The large companies have not published their year-end reports yet, and we're still talking with owners around the country.  It's too early to estimate the size of the total market, but we expect the year 2020 to show at least modest growth.

Outlook for 2021…

When we asked the owners about their projections for 2021, the overwhelming majority had a very optimistic view of the year in terms of revenue growth and the improving economy. But all the owners were concerned about their ability to maintain their bottom line due to: the probable $15 minimum wage mandate, the increase in the unemployment tax rate due to the large amount of unemployment compensation being paid, and raising taxes on earnings.

The owners thinking about selling their company in the near future were concerned about the proposed100% increase in taxes on the sale of a business [ as an example: assuming the sale multiple stays the same under the new proposed capital gains rate tax, a manned security company has to be approximately 30% larger in revenue in order for the seller to net the same dollars as the seller would have netted if he had sold under the present rate – this caused many owners to accelerate their timeline for selling to get a deal done in 2020].  Some experts are saying that even though the increase in the capital gains rate is all but certain, the probable effective date may still give owners wanting to sell time to get a deal done in 2021 and take advantage of the lower rate. Download complete report: DOWNLOAD

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