ASSA ABLOY’s acquisition of Kwikset and Baldwin illustrates how crucial the residential market for electronic locks has become in an access control industry that has diversified beyond products designed for enterprise-level buildings.

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Summary

ASSA ABLOY’s acquisition of Kwikset and Baldwin illustrates how crucial the residential market for electronic locks will be in an access control industry that is increasingly diversifying beyond products designed for enterprise-level buildings.

ASSA ABLOY acquires the HHI division 

In September, ASSA ABLOY announced it had signed an agreement to acquire the Hardware and Home Improvement (HHI) division of Spectrum Brands for $4.3 billion. Barring any complications with the regulatory approval process, the acquisition is expected to close in 4Q21. As the leading vendor of access control equipment, ASSA ABLOY has acquired hundreds of smaller companies since the merger of Assa and ABLOY in 1994. However, the transfer of HHI division’s key residential electronic brands (including Kwikset and Baldwin) will have the biggest impact in the access control market since ASSA ABLOY’s acquisition of HID Corporation in 2000.

Once the acquisition is finalized, ASSA ABLOY will strengthen its position as the leading manufacturer of access control equipment and will possess over triple the market share of its nearest competitor Allegion. The HHI division will have the most dramatic impact in ASSA ABLOY’s standing in the electronic locks industry, where these brands are projected to account for nearly 20% of ASSA ABLOY’s total global electronic lock sales. ASSA ABLOY has been the dominant vendor of electronic locks across nonresidential end user industries for decades but has faced comparative difficulties strengthening its market position in the residential sector in North America. The acquisition of Kwikset’s rapidly emerging residential lock brands addresses one of the few remaining gaps in ASSA ABLOY’s product portfolio. Omdia projects that ASSA ABLOY will account for nearly half of the total market for electronic lock sales across all vertical markets in North America.

The acquisition’s impact on the emerging market for residential electronic locks

In North America, sales of electronic locks could be almost evenly split into two unique markets: A stable and established market for nonresidential locks and a rapidly emerging, dynamic market for residential locks. Continued demand for new construction of residences in the United States, substantial retrofit project opportunities among homeowners and technological innovations with smart electromechanical locks have led the residential market to experience over 10% average annual growth rates prior to the COVID-19 pandemic. Smart residential electronic locks, such as HHI’s SmartKey Security brands, are designed to integrate with a wide variety of smart home applications and interfaces, including smart alarms, smart speakers, and smartphone applications. After installing smart electromechanical locks, a homeowner can unlock and lock doors to their homes remotely or through voice commands and can be notified at any time if an illicit entry is attempted.

ASSA ABLOY’s acquisition of Spectrum Brand’s HHI division will lead the rapidly emerging residential locks market in North America to align more closely with the nonresidential market. ASSA ABLOY has been the global market leader in sales of electronic locks for commercial, industrial, and institutional end users for decades. However, the residential electronic locks market had been much more competitive. Several innovative residential locks vendors had emerged over the past decade with alternative ‘smart lock’ electromechanical lock offerings that prevented ASSA ABLOY’s Yale and August Home brands from achieving a runaway position in North America.

Spectrum Brands, which more than doubled in revenue from North American sales over the past five years, was increasingly viewed by industry insiders as ASSA ABLOY’s primary competition in the residential space. The acquisition will subsequently create a smart locks juggernaut with near monopolistic control over the residential electronic locks markets in the United States and Canada.

The acquisition and smart home solutions 

A key unanswered question relating to the acquisition is whether ASSA ABLOY intends to leverage some of the HHI division’s smaller brands, such as Pfister and National Hardware, to expand beyond the access control industry and compete in the broader and increasingly lucrative smart homes market. For example, Assa Abloy could leverage the Pfister brand to expand into new categories like water leak management, smart bathrooms, and smart kitchens. However, this strategy could be a long shot because the Yale brand in the US has not expanded much beyond door security. Unlike its European divisions, Yale Smart Living, that boast security cameras and DIY security systems, the business units in the Americas have remained steadfast on one particular value proposition for consumers, namely door locks. Nonetheless, with this acquisition, Assa Abloy is at a crossroads. It can choose to continue down a path of locking hardware dominance or choose to leverage these new product lines to expand further into the home.

 

Appendix

Further reading

Access Control Intelligence Service - 2021

Smart Home Intelligence Service

 

Author

Bryan Montany, Senior Analyst, Physical Security Technologies

askananalyst@omdia.com