How fire safety rollups actually make money: a close-up look at Churches Fire & Security

Disclaimer: Unless noted otherwise, views and analysis expressed here are the author's own and based on public sources. The article is intended for informational and entertainment purposes only. This is not financial advice. Please consult a professional for investment decisions.

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Last week, we reviewed fire safety rollup fundamentals: reasons why PE firms obsess over the sector and ways in which they drive shareholder value. 

It is time to get more granular.   

Today, we profile one of the UK’s oldest, and most prolific fire safety and security (CCTV, intruder alarms etc.) rollups. Meet Churches Fire & Security: a $100M-revenue M&A machine backed by the mid-market PE firm Horizon. 

We will show you:

• How Churches screens for acquisitions

• What multiples it pays, and why

• What profitability enhancing actions Churches implements post-closing - in the words of its customers

Why Britain?

Churches pegs the UK’s fire safety and security market at £4B ($5B). The industry is highly fragmented, especially its downstream (servicing) part, with an estimated 2,500 installation, maintenance and monitoring providers. 

We should add that Horizon has a knack for buy & builds in mission critical industries. For example, it delivered a 4.6 MOIC with an investment in TotalMobile, a field service management software vendor.  

But first: have you got your ticket for the 26th February Serial Acquirer Summit yet?

Over the course of an afternoon in Hoxton, East London, connect with elite operators building empires in:

💻 IT Services & MSPs

🛠️ Installation & Technical Services (Fire Safety, Security, HVAC) 

👥 Professional Services (Accounting, Recruitment, Consulting)

🎟️ Ready? Then grab a ticket now: https://www.eventbrite.co.uk/e/rollupeurope-presents-serial-acquirers-summit-tickets-1206832982939

Churches has 60 acquisitions under its belt. Here is their playbook

Horizon acquired Churches in 2017 for £47M (c.$60M), representing c.3x revenue / c.12x EBITDA (source: UK Companies House). Concurrently Horizon set aside £40M for bolt-on M&A. If the latter figure does not strike you as a generous budget, consider the fact that under Horizon’s ownership, Churches has completed c.40 acquisitions, bringing the grand total to 60. The median target had sub £1M ($1.3M) in revenue. 

When evaluating prospective acquisitions, we have been told that Churches’ M&A team screens for 2 key criteria:

• Geographic focus - consistent with the goal of maximising density

• Revenue mix: fire vs. security and installation (project) vs. maintenance (service)

The higher the (recurring) services revenue, the more attractive the target.  

A sample of 22 transactions from 2018-24 reveals median multiples paid of 1.7x (revenue) and c.9x (net income). Grossed up for depreciation and tax, according to our calculations, the median EBITDA multiple works out to 4.5x. It is striking just how profitable the standalone businesses are, with a median net margin of 24%. 

Even these multiples look overstated to us. Why? Because Churches excels at making overhead vanish. From our conversations, we understand that normalised buy-in multiples are typically sub 1x revenue and 3-4x EBITDA. 

The resulting rollup looks like this

According to Churches’ most recent annual report (for the year ended April 2024), a staggering 97% of revenue came from “recurring and repeatable client demand”. Revenue split was 85% service and 15% installation. 79% of all installation work was commissioned by existing clients.

An excellent result! Lenders seem to agree, having supported a 2021 recap. In April 2024, Churches carried almost £70M of net debt, compared to an adjusted (!) EBITDA of £9M. That’s a leverage ratio of 7.6x. 

Alas, from a profitability point of view, the company has fared less well. 

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