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While General Electric's (GE) fire alarm and security business is solid, it's simply not big enough to keep the company's interest. In such an industry, it's critical to be the industry leader.
So this week, GE agreed to sell the unit to United Technologies (UTX) for $1.82 billion. Rumors of the deal have been buzzing since the summer.
As for United Technologies, the company is certainly hungry for deals. And, the fire and security market has been a major priority. United Technologies has built this business with a variety of deals, such as with Chubb security, Kidde and Detection Logic Fire Protection.
What's more, the dynamics of the business are attractive. Fire protection and security is based on stable contracts. Besides, it's a "must have" service.
True, the capital costs can be high. But then again, this is why it's important to be a market leader. So, with the GE deal, United Technologies will definitely add to commanding position -- by getting eight plans, 4,700 employees and about $1.2 billion in annual revenues.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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