ASG recapitalizes with Parthenon Capital

Thursday, November 1, 2007

BELTSVILLE, Md.--ASG has a new financial partner after completing an Oct. 26 recapitalization, but the "recipe for growth remains the same," said chief executive officer Joe Nuccio.
"We'll continue to use the same best practices and processes," Nuccio said. And the customer mix of residential and small business alarm systems, along with integrated systems for larger commercial and government customers, stays as well. However, the infusion of new capital, coupled with current market conditions, has whetted this super-regional's appetite for growth outside of its core geographic and product areas, Nuccio said.
The new financial partner is Parthenon Capital, a private equity firm based in Boston and San Francisco. The transaction, terms of which were not released, involved the repurchase of shares held by Waud Capital and Northwest Capital Appreciation. Nuccio and the "senior management team" will continue to be "significant shareholders" in the company.
The super-regional reinvented itself in 2003, when the assets of the former Alarm Security Group were bought by Waud and Northwest, and Nuccio came on board.
At that time the company had roughly $850,000 in RMR and 31,000 accounts, and a goal of tripling in size within five years. Now the company has about $2.8 million in RMR and 75,000 customers.
"Our plan all along was to grow into one of the top 10 alarm companies," said ASG CFO Ralph Masino. "In the next five years, at a minimum, we will double the size of the company."
Proceeds from the recapitalization will be used to continue to build density in its three hubs in the Texas and Mid-Atlantic regions. Look for the company to move into contiguous markets in the near future, Nuccio said. In addition, expect ASG to move into new product areas.
Over the course of the next year, ASG will "really fill in our commercial suite of products and services by providing our customers a managed services platform to include access control administration and central station video monitoring," said Bob Ryan, vice president of marketing and sales. Ryan said that ASG is comfortable expanding into these areas because the technology is now "at a point where it's stable enough." The company is currently "evaluating strategic partners and putting together financial models" to do this.
David Ament, a partner with Parthenon, said the firm wanted to invest in the security space, but that the challenge is finding a company with "the right combination of operating discipline, experienced management and dense markets." After looking at 30 companies in the last five years, "ASG stood out as the best model we've seen in the mid market," he added.