The phone call was unexpected. And it came the day before St Patrick’s Day. After six weeks of intense talks, the Irish alarm monitoring company HomeSecure was on the brink of a €25 million sale to Sector Alarms, the Norwegian group which owns the PhoneWatch business in Ireland.

The paperwork was being finalised. Colm Daly, HomeSecure’s founder and chief executive, felt he was only days away from closing. Not only had his company survived Covid-19 but it had come back from the disappointment of being jilted at the 11th hour by another bidder only last year.

And then the call came. “I don’t know how The Irish Times knew but there was a leak,” Daly said. “Ciaran Hancock rang me, and I said listen what do you know? I had to sit down afterwards and say you know too much!”

Daly had little choice but to confirm the basic facts. After the call, he rang his management team. “I said look we are going to have to pull the ripcord. It was exceptionally important to me that we told everyone ourselves. We wanted to reassure them their jobs were safe, and the HomeSecure brand was remaining intact, standalone and independent,” he said.

“I repeated that four or five times on a video call with our team. I know that people’s minds at the moment with Covid are not always in a good place and they are worrying more than usual. The last thing I wanted to do was add to that.”

After the article appeared, texts started flooding in saying congratulations. But there was one problem: the deal had not officially closed. “I had to do my best to try to control it,” Daly said.

By Friday of that week things were very close. He rang his lawyers at Matheson at 5pm but they said they would need another hour.

Daly waited in his office in the Eden Centre in Rathfarnham, Dublin 16. Most of his staff were working from home, but the few still coming in headed off, leaving him alone. “The office was empty and the sun was setting,” Daly recalled.

“It was quiet, and it was just a moment of reflection. I got a little emotional, and I took a moment to think what a ride it has been.”

Turning a fledgling idea into a business

Colm Daly is talking to The Currency just days after selling HomeSecure, a business he founded in 2014 and grew to have almost 20,000 customers and recurring revenue of €7 million a year. He admits he is a little tired. A 120-page share agreement had to be signed and more than 60 investors in the business had to be informed.

Then there were all the disclosures, indemnities, warranties and all rest of the paperwork required to sell a business. Sector Alarms, he said, had been easy to deal with. “The Norwegians have a very similar approach to us. They want to find solutions not problems,” he said.

The decision to sell he said made sense. “We were too big to be small and too small to be big,” he said.

Sector Alarms was a natural buyer for HomeSecure. Daly got the idea originally to set up HomeSecure when he was country manager for the Appco Group. This firm was a customer acquisition business which had a team of salespeople working with brands like Airtricity and Eircom Phonewatch. In May 2013 Eircom sold its Phonewatch business to Sector causing Appco to lose a big customer as the Norweigian firm took everything in-house. 

This got Daly thinking. Daly spoke to Simon Murphy, who was more senior than him in Appco, about setting up a rival to Phonewatch.

“I did up a business plan, and thought up the name HomeSecure,” Daly said. “Eircom had moved on, so the colours orange and grey were no longer in use, so we decided to use those colours in our logo as there was a familiarity about it.”

Murphy agreed to put up some seed capital. “We swept up the component parts of what was Eircom Phonewatch,” Daly said.

HomeSecure needed an alarm installation arm so they bought a small company in this area. “This meant we had all the accreditations and knowledge about how best to install alarms,” he said.

Next, he approached company that had manufactured the alarms used by Eircom and convinced them to work instead with HomeSecure. “The last part of the jigsaw was the monitoring so we went to Chubb and they agreed to work with us,” Daly said.

“They have been great for us. They are really trusted and we were able to leverage off their brand which really helped us at the very beginning when we were trying to establish ourselves.”

Securing investment

HomeSecure was now a credible alternative to Phonewatch and other larger providers in the Irish market. “We could never go after the Phonewatch brand as it is phenomenal. It just rolls off the tongue like Dyson or Barry’s Tea,” Daly said. “But we could go after them in terms of being more cost competitive. And we could compete on service as we were small and nimble. We did a lot of focus groups to understand our customers. We realised it wasn’t about bricks and mortar, it was about protecting people within the home, so that became our mantra.”

The problem with building an alarms business is that supplying and installing alarms is loss-making, but it is a business that can become lucrative if customers stick with you for a number of years. It requires capital to bridge the gap between building up a customer base and the number of years it takes for an individual customer to become profitable. So to grow, HomeSecure needed to raise capital. But at the start, this was a hard story to sell.

“We’d a small turnover at the start but our valuation was high,” Daly said. “Investors would ask us what’s your EBITDA, and we would say we don’t make a profit. Traditional valuations didn’t work for us. We needed to lose money to grow. We were engaged with PWC and they said once you get to 20,000 customers someone will come knocking and try to buy you.”

Conservative investors and debt providers didn’t like HomeSecure’s business model so they turned to angel investors and tax relief investors through an EIIS scheme who were prepared to risk their money.

Murphy and Daly knew Andrew Collins through Prepaypower, a pay-as-you-go utility business, as they’d worked for him selling this product directly to consumers door-to-door. Murphy had gotten to know him even better when he helped him raise money for a charity called Outreach Moldova.

Collins is a serial entrepreneur and brilliant marketeer who had previously built up accommodation site Needahotel.com and online insurer 123.ie before selling them both for a combined €100 million-plus.

Murphy and Daly started to woo Collins to join their board. In February 2016, Darren Byrne joined HomeSecure as chief financial officer. He was a friend of Collins who had worked with him in his 123.ie days and with Prepaypower. Collins became a director and investor in HomeSecure that May. The business was now beginning to motor.

“Andrew is deceptively good at what he does and very successful,” Daly said. “It is Midas touch stuff. He was able to give us good direction on the marketing side but also bona fides on the investment side. If Andrew Collins was in, then investors knew this company must be serious.”

Peter Murphy, managing director of Insignia Financial, became convinced of the potential of HomeSecure. He asked some of his high net-worth clients to invest in it including Michael Cawley, the former Ryanair executive. “He was the first to bring investors in, a great guy,” Daly said.

Stephen Byrne, a co-founder of Orca Financial, was another believer. “They have been business-changing for us as they brought in eight to ten more investors at various levels,” Daly explained. “Stephen Byrne saved our bacon last year when we had a hole in investment, he just came in and raised the money.”

HomeSecure also raised money from dozens of EIIS investors who put in €10,000 and upwards into the business. This money was raised by Eddie Murphy, a private investor for high net worth individuals and separately Mark Dawson and Joe Moran from Willis Towers Watson.  “All of these guys brought in so many connections between them,” Daly said. “They really helped us keep going.”

Burning cash

HomeSecure could see the size of the opportunity in front of it. In 2017, it launched new products which brought them into the smart homes as well as security sector. It was growing really fast, and as a result losing more money as it did so. It never tried the private equity route, but it did try to raise a larger round, an experience which had placed the business under huge pressure.

Coming into Christmas in 2017, HomeSecure faced a crash crisis after it had scaled up because it believed it had lined up fresh EIIS investment from a well-known finance house.

“Everything was good,” Daly recalled. “And then they came back to say it failed its internal audit committee.”

Daly and his management team found this out after they’d burned through cash growing the business in preparation for this funding. When it fell through, they realised they didn’t have enough money to make January’s payroll.

“It was a very stressful time,” Daly recalled. “As any start-up founder or sole trader who has experienced that pinch knows. When you’re looking around your open plan office at your team trying to keep them motivated, but inside you’re in your own world going bloody hell, I have twenty days to get the money together to pay these guys wages.”

Daly reached out to two old friends to help the business keep going. He asked Mark Buckley, then the chief financial officer of recruitment company CPL who today is CFO with Cool Planet Group, and Niall Anderton, a senior executive with petrol station group Circle K, could they help and they agreed to. “They are good mates of mine and they stepped in very quickly. It has been really nice as part of this exit to see them do well and be rewarded for their confidence in backing me and the business,” he said.

In total – from foundation to sale – HomeSecure raised €8 million, with about €4.5 million coming in as direct investors and €3.5 million from EIIS.

Take-off

In 2019, Homesecure’s business model began to pay-off. It switched its alarm maker to Ajax Systems, and it refreshed its brand and website.

“We went from being a spotty teenager to going after it as an adult in the marketplace,” Daly said. “Our lead generation increased by 35 per cent; in the last quarter in 2019 we did double what we had in quarter four the previous year,” he said.

“In 2020 we went into the year with a real bit between our teeth doing really good numbers and then Covid hit,” Daly said.

The entire business took a pay cut to conserve cash with Daly and his senior team taking a bigger percentage hit. The fear was that customers would cancel their alarm payments as they were now in their homes all day, or they simply wouldn’t be able to pay.

“We really worked with our customers and we didn’t have credit control issues at all,” he said.

Lockdown was another challenge, so HomeSecure put all its resources into sales when it couldn’t install. “Right now there are 700 or 800 customers waiting to install. We don’t know when we are opening up again but hopefully April 5. But who knows what is going to happen we will hopefully be tagged on with residential construction but it is out of our hands,” he said.

In the midst of the crisis in 2020, HomeSecure received an approach from an overseas buyer. “We signed NDAs so I can’t say from whom, but we went in and we danced for a four or five months period. In the end it didn’t work out because of Covid-19 and valuations,” Daly said. “The approach was a bit of head wrecker.

“We had a cash pinch and we had to go out for emergency investment. We’d been due to close an investment round just before Covid-19 but that investor had pulled out which was understandable. The world didn’t know what was going to happen – so we had to get in quick investment at that time.”

Covid-19, he said, had however helped the business in other ways. The pressure caused its team to work even closer together, and it paid off. “Last year we grew by 15 per cent,” Daly said.

Preparations to prepare a data room and conduct a virtual sale with the failed bidder last year put them in a strong position to close quickly when Sector approached.

“In a Covid world growing customers organically is harder, so maybe that encouraged Sector to acquire us,” Daly said.

*****

After the deal closed Colm Daly went home to his wife Aoife and three boys. They shared a bottle of champagne and had a nice weekend. On Monday he got an email from Danske Bank saying that it was going to distribute funds that day. “I went on to banking online on my phone and it was like, do I have to hold it landscape to fit it all in? It was wow,” he said.

Daly said he hopes to meet his colleagues at some point in the months ahead to mark the sale. Post it Colm Daly is due to leave the business in a few months’ time to be replaced by Eoin Dunne, managing director of Phonewatch. Daly’s plan is to take a couple of months off. “It was a stressful year between Covid, failed approaches and the sale. I am wound-up and I need to decompress,” Daly said.

“But I am open to conversations. I like business. I like the challenges, the camaraderie and the teamwork.

“I will work again without doubt. It has been nice and successful, but I am not going to retire or can retire. I wouldn’t want to. I will take my time and make sure it is the right thing to challenge me and fit in with family life.

“I understand customer acquisition, customer journey, selling a service, retention and loyalty. All those commonalities work across utilities and subscription based businesses.”

HomeSecure, he said, had found a good new owner. “We have had to up until now grow the business with the handbrake on due to the lack of cash. This is the right investment for it, and I can’t wait to see what the team does without me.”