Lenel opens door for UTC
HARTFORD, Conn.--United Technologies Corp. furthered its reach into the physical security marketplace in March through the proposed acquisition of Rochester, N.Y.-based Lenel Systems International for $400 million, providing the company with deeper penetration into commercial, government and homeland security segments.
Based here, UTC is a publicly held provider of technology and services to aerospace and commercial building industries. The company's operating businesses include Carrier heating and air conditioning systems, Otis elevators, Pratt & Whitney aircraft engines and UTC Power products.
The husband-and-wife team of Elena and Rudy Prokupets, who founded the privately held company in 1991, will not be changed once the acquisition is finalized. Elena currently serves as chairman, president and chief executive officer of Lenel, and Rudy is executive vice president of research and development, as well as chief technology officer.
"I think it's a fair valuation; it was done with the assumption of future growth," said Elena. "We feel it is a fair price, and they think it's a fair valuation."
She stressed the company is not just access control company, but an information security management product provider. Considering this, the purchase price was determined largely by the valuations software companies in the market have commanded in the past and present.
"According to our information, the company was doing approximately $80 million in sales which represents a multiple of five-times sales," said Jack Mallon, managing director of Mallon Associates. "By the norms of the industry, it was a very rich price."
Recent acquisitions that represent in the range of two-times sales are General Electric's purchases of InVision Technology and Edwards Systems Technology, and the UTC and Kidde deal, according to Mallon. One of the larger transactions was Marsh & McLennan's acquisition of Kroll Inc. in a agreement that represented three-times sales.
Once the deal is completed, which is expected to occur this quarter, Lenel will join Chubb and Kidde within UTC's newly created fire and security division, reporting to the unit's president Olivier Robert.
With this deal UTC builds on its existing security business Chubb, a provider of security and fire protection products and services. In 1999, UTC purchased Chubb for $1 billion and entered the security market for the first time.
Earlier this year, UTC completed the takeover of fire extinguisher manufacturer Kidde for more than $2 billion. The deal reunited Chubb and Kidde, as both companies formerly operated within the holding company Williams Plc.
Elena said the time was right to sell, as the company already spent enough time evaluating acquisition offers. Additionally, by merging with a larger organization, Lenel is better equipped to compete against the likes of General Electric, Honeywell and Tyco.
"Lenel is going to be more stable and in business longer," she said. "Basically, everyone is extremely happy."
Lenel's flagship product is OnGuard, a software suite of products for access control, smart cards, alarm monitoring, digital video, biometrics, intrusion detection and visitor management controls that was launched in 1995. The company counted more than 8,000 Lenel security systems installed for commercial and government security clients.
Lenel's customers, who can be found in 75 countries, include the U.S. Department of Defense, Microsoft, U.S. Post Office and New York City airports John F. Kennedy International and LaGuardia.