Tyco to spend $500 million on emerging-market buys

US-based security solutions company Tyco has set aside $500 million to acquire companies in India, Brazil, Middle East and China to push inorganic growth in these markets.

The company’s Indian subsidiary, which provided the entire security solutions for Terminal 3 of the Indira Gandhi International Airport in New Delhi, is looking to buy companies in India to build capabilities in the area of product and system integration.

Ramesh Jayaraman, managing director of American District Telegraph (ADT), a division of Tyco, told DNA Money that the company was “currently going through an analysis phase” to zero in on targets.

“Right now, we are going through an analysis phase — of who’s available, what sense it would make to buy the company and how do their books look. If these make sense, we will actually go and pick them up to add to our inorganic growth story,” Jayaraman said.

Early this year, Tyco had picked up Brinks Home Security Holdings for $1.9 billion. The company is eyeing more than one company for acquisition in India.

Tyco is also looking at building product and system integration capabilities in India. And since the company has enough cash, it wants to surge ahead of its competitors through inorganic growth, Jayaraman said. The company currently has $2billion cash on its books.

“Typically, most companies follow an acquisition strategy when organic growth is not so good. For us, however, it is a different story. Despite growing 2.5-3 times the market growth, we believe we can grow much faster inorganically,” he said.

“Our intention (to go after growth through acquisition) is to have Indian solutions for India and also swiftly gain more market share.”

The $7-billion company operates in 60 countries and earns 40-45% of its revenues from the US and the remaining comes from the rest of the world.

The company’s revenue growth had slowed down in the US market during the recession, while it surged in the emerging markets like Brazil, Middle East, China and India.

“These four countries are at a stage of evolution, where we want to go and invest our money in,” said Jayaraman.

Earlier this year, facilities security company ISS acquired 49% of Indian security firm SDB Cisco, which provides manned guarding, cash and valuable transportation, and electronic security services.

A December 2008 report by Boston Analytics said the Indian security market would grow 30-35% a year till 2011. It estimated the market to be worth $1.3 billion by 2011.

Among the biggest spenders of installing security devices are IT and ITeS companies, the report said. Commercial institutions and the hospitality industry round up the Top 3 spenders.

Retail and aviation would be major drivers, going forward.