Security and surveillance services are often a necessity for many reasons, including insurance purposes, a direct lender pointed out. Services like fire and electrical safety are often regulated and required in large residential and commercial buildings.

The most recent to hit the market was RGE Services, a UK company providing electrical maintenance and testing and fitting of equipment for the public sector. YFM launched a sale process marketing the company off an £8m EBITDA, 9fin reported last week.

Security is paramount

Among the 15 processes tracked since February 2023, 10 are financings done in the private credit market, 9fin data shows. The remaining five processes are ongoing sales.

In April, Tengelmann Twenty-One mandated Lincoln International to sell German occupational safety services provider Arsipa. In this case the company — marketed off a €10m EBITDA — offers the opportunity to invest into a group of service providers in occupational safety, occupational medicine and environmental protection in Germany.

The popularity of the sector has been increasingly clear this year. In March, Pemberton provided a €115m loan to IK Partners for its acquisition of Dutch camera surveillance firm Kooi. Leverage was 4.3x, priced at 600-625bps, 9finreported at the time.

In February, Park Square and SMBC provided a €165m loan to Copeba for the acquisition of Dutch firm SmartSD — a digital platform to distribute surveillance equipment — priced at 600bps above the benchmark.

But the trend goes back to last year, when lenders geared up to provide leverage at 8x including PIK for Valedo Partners' sale of Swedish security and surveillance firm Prosero in November. Marketed off €50m EBITDA, a debt package at those levels would have amounted to a whopping €400m.

The deal was eventually put on hold due to a sticky M&A market. With a healthy amount of interest among the market's largest players, including Ares, it was certainly not due to difficulties over debt financing.

“Security and surveillance companies can win such high leverage because they are paid on fixed fee contracts. It's almost like software [SaaS] and way less risky than say, construction, which has so many varying costs,” a market source said back in November.

Simply put, as a direct lender said: “It's non-cyclical, it's maintenance based, it's a critical service, which all makes it very popular.”

Contracts — a winning feature

The majority of these companies, especially in the case of surveillance and security as a service, run on contracts, which provides a secure income for a set period of time.

This made for a smoking hot opportunity among lenders when Nordic Capital launched the sale of Consilium, a Swedish fire and gas equipment provider, in November 2023. After fierce competition among the market's largest players, including Hayfin and Ares, incumbent lender Blackstone eventually won the deal, providing a €300m unitranche to winning bidder Antin Infrastructure Partners. The loan was priced at 600bps.

“If you have a five-year contract you know you have that income. It's also something most people just renew when the contract is out, unless something goes seriously wrong,” a debt advisor said. “Even in an economic downturn people would continue to pay for it, it's not something you cut, so it's not as cyclical.”

A legal source agreed: “It's an attractive space for equity and debt because you have that stream of money coming in and you know it's coming.”

The market is also pretty well set up for consolidation and growth, the legal source continued, explaining how the number of small companies, which are good candidates for consolidation, makes for attractive roll-up opportunities.

“There's a big range in company size, from smaller mid-market companies to larger ones — it makes a good case of consolidation. Will it be the new vets or the new accounting roll-ups?” the legal source asked.

“It crosses countries and is pretty well spread across Europe, so these can become really big assets. I suspect we will see more come to the market and more consolidation.”

Looking beyond private credit, one of the largest names in this space is Swedish home alarm specialist Verisure. A favourite among CLO managers, Verisure decided to stick to the syndicated markets and wrapped up an A&E this week of its €525m July 2026 TLB, extending the loans to 2030. This priced at E+350bps at par.