TEESDALE, UK—According to a report from the research and consultancy firm Plimsoll Publishing, the UK security market is in for a prolonged period of consolidation, with as many as one in seven companies possibly changing ownership as a result of the current economic climate.

The report identifies a “surprising number of ‘cash rich’ competitors waiting in the wings,” ready to drive this consolidation.

“I am sure any director worth his salt would agree that, in the current climate, there are simply too many companies chasing too little market,” said Plimsoll analyst David Pattison. “With many directors eyeing the exit doors and highly leveraged buyouts consigned to history for the time being, it really is a buyers’ market out there for cash rich companies.”

The Plimsoll analysis identifies 196 companies that have a “sizeable cash reserve” on their balance sheets which Pattison said is “generating nothing” due to record low interest rates.

To illustrate the point, Pattison pointed to one company with a GBP 42mln cash pot, or the equivalent of 80 percent of its turnover. “These companies are now in the position to buy up large chunks of market share at rock bottom prices and make that money work for them,” said Pattison. “They must be like kids in a sweet shop at the moment—all those distressed competitors available at a fraction of their true value.”

The security market remains one of the UK’s most fragmented sectors, according to Plimsoll. The report, which analyzed 668 companies with a turnover of more than GBP 1mln annually, singled out 127 which it believes to be prime takeover targets.

“Buying one of these businesses represents a massive opportunity for someone to enhance their share of the market,” said Pattison. “Either way, the market is set for a wave of takeovers in the next months.”