Devcon to be super regional?

Sells off construction arm, third-party monitoring
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Tuesday, August 1, 2006

BOCA RATON, Fla.--With the help of two early-summer business deals, Devcon International positioned itself to join the likes of ADS Security in the Southeast, Bay Alarm in the West and Guardian Protection Services in the East as a "super regional" security company.
On June 14, Devcon announced its intention to sell its construction division to a private investment group, and reinvest the proceeds into its security operations. Also in June, Devcon sold its third party monitoring operation (see related story, page tk).
Security industry observers were not taken by surprise. "To sell the remaining construction business is exactly consistent with their strategy, so I think this is the confirmation of what they've effectively been telling us or intimating they will do all along," said John Mack, president and chief operating officer of USBX advisory services.
Russ Cersosimo, chief executive officer of Guardian Protection Services, said both deals appeared to be smart moves for Devcon.
"They threw out a fishing net and got as much in the boat as they could and now they're starting to sort through to see what's worth keeping and what'll be able to yield the margins that they need to be able to make it a good return on investment," he said
The decision to sell the construction business, which Devcon estimated would be valued at $12.2 million, was still subject to a final agreement as Security Systems News went to press in early July. The Symonette Group led the purchasing group.
Devcon president and chief executive officer Stephen Ruzika did not return several requests for comment by press time. However, he said in a prepared statement, "This transaction will substantially complete Devcon's transformation into a security services company, in addition to supplying us with valuable additional cash resources."
Devcon bought its first alarm company in the summer of 2004, and has been building its security business ever since. The company has three operating divisions, the security division, the construction division and the materials division.
"Upon completion of this transaction, only one significant materials operation remains--Devcon's St. Martin/Sint Maarten materials operation," the statement said.
Once this agreement is completed, Devcon will have realized roughly $42.8 million in value to date from its construction and materials operations, according to the statement. "These amounts have been or will be redeployed into security services," the statement said.
John Mack praised the super regional business model. "The strategy of focusing on substantial density in a few select markets that have lots of potential to grow is a very good strategy," he said. "I think if they can divest the construction business and focus all their resources and energy on building a world-class alarm business, I think that's the right strategy."
Cersosimo issued one bit of caution to aspiring super regionals. "If you look at history in our industry, very few companies have emerged like a phoenix, just strictly through acquisitions. They better pay attention to maintaining their internally generated sales," he said. "Just to grow from acquisitions and consolidation has historically gotten companies in trouble."