PSI is the latest to be scooped up by IASG

SSN Staff  - 
Thursday, January 1, 2004

RANCHO CUCAMONGA, Calif. - Protection Service Industries gained a new owner in December, a year after word first surfaced that the residential and systems integration firm was for sale.

The winning bidder was Integrated Alarm Services Group, which owns the likes of wholesale monitoring company Criticom International, a financing arm, and a Long Island, N.Y. installation firm Payne Security, to name a few.

IASG paid $46 million for PSI, which is reported to have the equivalent of 59,000 alarm contracts. PSI had been owned since 1994 by Lane Industries, which saw it grow from a single branch business to eight locations.

“We were interested in PSI because it gave us the opportunity to begin to migrate away from total reliance on residential monitoring,” said Tim McGinn, chairman and chief executive officer of IASG.

McGinn said PSI’s senior management will remain in place, along with the company’s name. But IASG does plan to add some design capabilities and engineering functions so the company can offer more sophisticated and technologically challenging systems.

“In addition to our very active and successful mid-market commercial business, we’ll be looking to expand our activity in larger engineered systems and GSA contract opportunities,” concurred Robert Ricucci, president and chief executive officer of PSI.

According to a security industry source, IASG beat out a number of other bidders, including bidders with larger offers, because the company had the cash on hand to make the acquisition happen before the end of the year. IASG recently raised more than $200 million through an initial public offering and has been using that money to fund a number of acquisitions in the security industry.

“This may be the best transaction that they made in that they have purchased it inexpensively and that they have a good management team in place to manage the portfolio,” said Tony Smith, president of Security Finance Associates, an investment banking firm in Pasadena, Calif.

But despite the fair purchase price, Smith said that this deal “uses up an enormous amount of their excess cash” and that IASG plans to leverage these acquisitions to bring in additional money through debt financing.

During the nearly 10 years that PSI was owned by Lane Industries, the company made 25 acquisitions in the security market, said Bill Keating, vice president of Lane Industries, a family owned holding company with interests in other industries.

Keating said the Lane family decided to sell PSI to focus its efforts on its other industries, such as its office product manufacturing, hospitality, cattle raising and real estate businesses.

“Last year we were looking for a buyer for our residential customers and at the end of the last year we decided to change directions,” said Keating. “In April of this year we decided to put the entire company on the market.”

The entire company not only included PSI’s integrated and residential business, but its Sonitrol franchise located in San Bernadino, Calif., and a patrol response company in Blue Jay, N.M. PSI’s other branches are located in Livermore, Stockton, San Diego, Phoenix and Albuquerque, N.M.

Security Performance Partners, a business and financial advisory firm focused on mergers and acquisitions in the alarm industry, represented Lane Industries in the transaction. The company is owned by Peter Flynn and Mark Sandler.