SAFE Security recapitalizes, looks to expand

SAN RAMON, Calif.--Last week, SAFE Security announced private equity firm Rustic Canyon/Fontis Partners had purchased GE Capital's entire stake in the company. According to the Wall Street Journal, RC/Fontis paid $9.5 million in equity to buy SAFE, and SAFE CEO Paul Sargenti is retaining a stake of "more than ten percent."

The Journal said SAFE had $16 million in revenue last year and plans to grow more than 20 percent annually within three to five years. The deal also includes a $25 million senior credit facility from Bank of America. Salt Lake City-based investment bank Seare Marriott & Co. served as financial advisor.

According to Sargenti, the new infusion of capital positions SAFE well for the future. "For SAFE Security, this has been a long process. We've been with GE capital, first as a lender and then as a lender and a partner, for 10 years," said Sargenti. "We were able to refinance and recapitalize the company with GE's consent as they wanted to exit the security space--it just wasn't the right investment for them--and SAFE was one of their last and biggest [security interests]."

GE Capital said it preferred not to comment on the transaction.

Industry observer Les Gold of law firm Mitchell Silberberg & Knupp, LLP claims the sale of SAFE to RC/Fontis is indicative of coming growth for the industry. "This certainly puts another viable player in the marketplace and, under the circumstances, gives them a new opportunity to get in there and start expanding their operations, which I think will be very good for the industry," said Gold. "I think the opportunity is still there. I think business is good, and I think business is going to get better."

RC/Fontis general partner Gabrielle Greene says the time was right for an investment in the security industry and SAFE Security was the right fit. "This is the first investment for us in [security], and this company had one of the strongest management teams we've come across," Greene said. "The founder and CEO is just extremely knowledgeable, has an incredible track record, and is very, very highly-regarded. So as we got to learn more about this industry, there were a number of things that attracted us. One is that it is very attractive from a financial perspective. The combination of the predictable recurring revenue and the fact that that revenue is quite profitable--in any environment, really--but particularly in this environment."