Equity firm to buy AlliedBarton

Thursday, July 31, 2008

KING OF PRUSSIA, Pa.--The Blackstone Group, a large private equity firm, announced this week an agreement to purchase guarding firm AlliedBarton, the third largest in the United States, for a reported $750 million.
Sellers MacAndrews & Forbes Holdings, another equity firm, paid $263 million for the company in 2003. However, in the meantime, the company purchased Rentokil Initial's U.S. guarding operations in 2006 for roughly $75 million. A New York Times report puts AlliedBarton's 2007 revenues at roughly $1.5 billion, with 52,000 employees.
Robert Perry, founder of Robert H. Perry & Associates, which represents companies looking to sell their security guarding businesses, said this move should create interest within other equity firms who might now begin eyeing the guarding and security market. Already, however, private capital has been more interested than usual.
"We've had more interest from investment groups than we've had in 20 years," Perry said. "Several of them are trying to get into the business."
But aren't guard firms known for being low-margin, HR-intensive operations? Why would equity firms be interested in that?
The market is "still attractive from a consolidating viewpoint," Perry said. "The margins at the account level for the small- to medium-sized company is still in the 17 to 18 percent range." So, if a larger company can come and acquire those accounts, while eliminating overhead, the larger company can "eliminate the redundant cost and add 17 to 18 percent to the bottom line. There's still a lot of very well run, highly respected small- to medium-sized security guard companies still available that could be a target for them."