Initial Security increases Southwest density with Smith Legacy purchase

Wednesday, February 1, 2006

SAN ANTONIO--Initial Security, a subsidiary of United Kingdom-based Rentokil Initial, announced in December the purchase of Smith Legacy Security, a medium-sized guard firm in the San Antonio area. SLS owner Julie Smith Nelson will use the undisclosed proceeds to focus on another aspect of the security industry (see accompanying story, this page).
Leonard Courtright, regional vice president for the southwest region at Initial, called the SLS buy a "bolt-on" acquisition, as it made for an "exact geographic and operational overlap." Consolidation was nearly immediate, he said, with all 285 guards being retained and all overhead employees who wished to remain staying on board. There was a familiarity that helped: Nelson's grandfather, Stanley Smith, founded Stanley Smith Security, which merged with Rentokil in 1995 to form Initial Security.
At $4.8 million in annual revenues, 97 percent of which came from guarding, SLS was roughly twice the threshold Initial looks for in terms of company size when making acquisitions, said Courtright. Initial's North American revenues were about $285 million in 2005, operating more than 60 branch offices and employing 14,000.
This is part of a strategy of acquisition for Initial, said Courtright, that looks for bolt-ons almost exclusively when it does deviate from a general policy of organic growth. He pointed to the 2002 acquisition of the Dallas-based Innovative Security Group and the spring 2005 purchase of OCS Security of New York as examples of the trend.
"What it really means for us is critical mass," said, Randal Dorn, Initial's president and chief executive officer. The company looks to build up density in a geographical area, which makes them "able to pursue larger national contracts," he said.
He noted that companies are increasingly looking to subcontract out guarding work. "What we're seeing along those lines is [national-level] companies wanting to go with one, two, or even three preferred providers across the country," Dorn said.
Smith Legacy's customer base, which includes the City of San Antonio and Dominion Country Club, was attractive, too, said Courtright.
"They're high-profile accounts that require a certain level of service that Initial has the ability to provide," Julie Smith Nelson noted.