Great opportunity for investor Great Hill, CSG

Private equity firm re-enters the industry
Tuesday, March 1, 2005

BOSTON - Central Security Group experienced a change in ownership in late January when private equity firm Great Hill Equity Partners purchased the alarm company from Stolberg Equity Partners.

Stolberg Equity Partners, along with security industry veteran Mark Wilson, now the president and chief executive officer at the firm, developed CSG in 1999 to purchase U.S.-based monitoring businesses - it purchased Guardian Security Systems that same year. Wilson said Stolberg Equity Partners met their investment criteria, which allowed the company to be courted by Great Hill.

Today, CSG handles 58,000 accounts and operates predominately in the south central region of the country. The company is working on expanding its business - plans are to open new offices in Wichita, Kan., and Dallas in the coming months.

“Over the next few years we will expand into Florida,” said Wilson. “We’ve had a lot of inquiries from dealers in that market.”

The expansion will be fueled by CSG’s access to capital from Great Hill. For the Boston-based equity firm, the deal marks its return to the security industry.

“We’ve had involvement in the security industry since 1986,” said Chris Gaffney, managing partner of the firm. “We didn’t play in the 90s because prices were too high.”

He said CSG was the company to purchase when Great Hill was interested in investing in the market again due to CSG’s strong background and management team.

“Central was the only company that passed our acquisition criteria and passed it extremely well,” Gaffney said.

The criteria included the company’s positive cash flow, a high percentage for a return on investment and the ability to grow value. The fact that CSG operates through a dealer program - it currently has 100 dealers on its roster - also attributed to Great Hill’s interest in the company.

“Their dealer program has very low fixed costs,” Gaffney said, “and in an economic downturn it won’t be hit with costs that won’t be productive.”

Wilson said Great Hill’s experience in the market and solid financial status assists CSG with its plans for the future.

“I think that one thing they bring to the table for us is they give us a very strong financial partner,” he said. “They are also very experienced in the security business, giving us an equity partner to draw on for advice and counsel as we move forward.”