The next big industry player?

Golden Gate Capital: On a well-funded mission to build a 'global, fully integrated security company'
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Thursday, October 15, 2009

SAN FRANCISCO—Golden Gate Capital, a quiet, behind-the-scenes player in recent years, made news with its recent acquisition of Devcon Security, and it’s likely to be making more news soon, operating executive Christopher B. Munday told Security Systems News.

Noting that Golden Gate, an $8 billion private equity firm, still has $4.5 billion of available capital, Munday said the “plan here is to keep building out and ultimately to build a global, fully integrated security company.” Golden Gate, he said, wants to be “in control of everything, creating accounts, [providing] equipment, holding, servicing and monitoring accounts.”

Golden Gate in June of 2008 acquired Pinnacle Security, a summer-model company based in Utah. A September 2008 $150 million credit facility (with LaSalle/Bank of America) enabled Pinnacle to keep its accounts. Operations were beefed up there in October 2008, when Pinnacle bought the sales force and technical department of Icon Security, a smaller summer-model company in Utah.

Two weeks ago, Golden Gate acquired Devcon Security. Munday and Robert Farenhem (CEO and president of Devcon) have said that there are no immediate plans to combine the two companies. However, Munday, who serves as chairman and CEO of Pinnacle Security, will join the board of Devcon as chairman, with the goal of looking at the synergies between the two companies.

“We’ll get the relevant people involved from both companies … to explore areas of cooperation,” he said. “We don’t know how it will shake out,” Munday explained. “We may find nothing, some things, or a lot of things” that can be done to “improve the synergies at the back end of the businesses.”

While Pinnacle, a summer-model company, and Devcon a traditional security company, have starkly different sales methods, there are likely lessons the companies can learn from each other, he said. In addition, Pinnacle will clearly be interested in Devcon’s monitoring capabilities, Munday said.

On the acquisition front, what kinds of security companies might Golden Gate be in the market for? Munday said another alarm company, a monitoring company, or a small technology company are all possibilities.

John Gilligan, Golden Gate Capital principal added, “We tend to be very long-term, strategic-oriented investors; we seek out management teams to partner with and tend to acquire a number of businesses in the space.” For example, Golden Gate acquired 70 different software companies in nine years. “We acquire competitors to scale the company, [to acquire] new product lines, to spread into new geographies. All of those obviously are applicable to the security space.”