One down, many to go?

Argyle completes ISI deal after seven months, now looks for more
Saturday, September 1, 2007

SAN ANTONIO--After more than seven months of paperwork and red tape, Argyle Security at the end of July completed its acquisition of ISI Security Group, an integrator serving the corrections market, along with other commercial verticals. In the end, seven months after agreeing to be acquired, ISI received $18.6 million in cash, $2 million more than was announced as part of the initial agreement, and 1.18 million Argyle shares, valued at nearly $30 million. The completed deal represents roughly $15 million more than the initial agreement.
This may be because ISI has grown revenues 42 percent year to date and now holds a backlog of orders valued at roughly $100 million.
However, it wasn't necessarily negotiations and due diligence that held up the transaction. As a special purpose acquisition company, or SPAC, the company was not your ordinary public company looking to make an acquisition. After first selling shares to raise money, a SPAC must then purchase a company that meets a very specific criteria previously outlined to those investors. In Argyle's case, the company was looking to acquire a company that could quickly move toward being a leading global company in the rapidly growing security industry.
However, both Argyle and the SEC had to agree on just what would satisfy that criteria. Simply put, said Argyle chairman and co-chief executive officer Bob Marbut, a SPAC "is a different breed of cat ... We looked at a number of companies all over the world, and kind of luckily found Sam's company in our own backyard (search "First piece of Argyle Security" at Then you go through this proxy process with the SEC, which in turn goes to the shareholders." With a relatively small number of examiners at the SEC dedicated to SPACs, most of whom are diligent in their examination, it shouldn't be a surprise that the process took six months, "the prospectus got to be over 300 pages and they now know who I dated in the seventh grade," chuckled Marbut.
However, "now we're a normal public company and if we're making an acquisition that involves purchase accounting, even if it involves stock, we just have to go to our board and their board."
Now Marbut and the rest of his experienced management staff will look to capitalize on former business in Israel and elsewhere around the world to make ISI a global enterprise, with "growth through strategic acquisitions that can be integrated into the company in various geographic markets," said Marbut.
He said fire service might be attractive, or verticals that complement ISI's strength in corrections.
"Then there will be some tuck-in acquisitions that might have some specific technology that might be utilized, maybe something software-centric."