IASG CEO and president step down in restructuring move
ALBANY, N.Y.--Two of the top brass at Integrated Alarm Services Group, instrumental in forming the public entity three years ago, are stepping down from their roles at the holding company.
In late April, IASG announced Timothy McGinn, chairman and chief executive officer, would resign June 1 and Tom Few, Sr., president and vice chairman of the board of directors, stepped down from his role May 1.
Replacing them at the company, whose most recognizable asset is Criticom International, will be John Mabry and Charles May. Mabry has been elected as non-executive chairman and took on chairmanship of the board of directors for the company, effective June 1. May acted as a special adviser to the board in May and moves into the role of president and chief executive officer June 1.
The announcement comes at a time when IASG is in the midst of a strategic review by Allen & Company, a New York City investment bank, to outline options for increasing shareholder value.
"The change of management had nothing to do with the Allen report at all," said John Mabry during an April 25 conference call to discuss the management restructuring. "This process was talked about several months ago, before the Allen report was brought to our attention."
In the next months, May hopes "to get to know all the management that is here, assess the management personnel, the current business plan and forecast for 2006," he said during the conference call. "I hope to complete a visit of all offices in the next 30 days and meet with all key personnel to make sure that we have all sufficient things in place to ensure that we are going to make the 2006 plan to the extent that we believe we can." He added that, if goals appear out of reach, he would start to look at alternative ways to achieve them.
Despite these moves, Jack Mallon, managing director at investment bank Mallon Associates, said IASG "is not out of the woods yet."
Mallon, who has followed the company from its inception, said "Right out of the gate in 2003, they had serious problems and the $218 million dollars that they raised didn't really solve the problem." According to Mallon, the company paid off about $75 million of its debt, leaving about $80 million debt. "So right from the get go, even with the raising of 200 million dollars, they still were saddled with some $80 million in debt and since then they have added to the debt, so it's a continuing problem."
"The management shake up," he added, "is part of the reflection of the weak balance run sheet and the steady losses."
Both Mabry and May have had diverse roles and experience in the security alarm industry, and May promised to "work to make sure that we meet the goals that have been set by Tim and the management team, and that we have sufficient systems and people in place to make sure we meet our numbers".
Mabry, founder of American Alarm Company, has had active roles at the Security Network of America and the Central Station Alarm Association. Since March 2003, he has served on IASG's board of directors.
May began his industry career at Federal Alarm Systems and was one of the founders of National Guardian. He has worked on the acquisitions of more than 45 companies. In the mid 1990s May purchased Smith Alarm Systems; as president he helped to grow the business to more than 75,000 customers.
The industry should "step back and give the new CEO a chance to perform. May is an experienced industry executive and he might have some programs to bring the company back to a cash flow positive level," Mallon said.
The security industry has seen debt become a problem before with retail alarm companies such as Protection One, said Mallon. That company was "burdened with over a billion dollars in debt. They managed to bring that debt down to $321 million and turned it into cash flow positive, so it can be done. But as the saying goes, 'It ain't easy,'" he said.