Smith & Wesson gets further into security

Integrator buy may be just the first for long-time gun maker
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Tuesday, September 1, 2009

SPRINGFIELD, Mass.—After entering the residential security market last year through a licensing agreement with Nationwide Digital Monitoring, Smith & Wesson got more firmly into the commercial security market in July with the acquisition of Universal Safety Response, a systems integrator and manufacturer of perimeter protection solutions. S&W paid up to 9.7 million shares and up to $26.2 million in cash for USR, depending on some performance measures.

“S&W is a firearms company with a very long history,” company CFO Bill Spengler said. In the last five years, he said, the company has broadened its offerings within the firearms industry, moving from being mainly pistol-focused to acquiring a company to get into long-gun making, moving from being primarily retail and consumer oriented to being more focused on professional markets, law enforcement and the military.

With that done, “we think it makes sense to broaden into other areas, and part of that is pure logic, not to be susceptible to one particular category, because the brand itself has a tremendous amount of strength when it comes to protection and security of all kinds.”

Further, “if you look at firearms, it generally tends to grow a bit ahead of inflation, but it’s not growing at an exponential pace, so we were looking for a strong secondary driver.”

Smith & Wesson thinks it has found that in commercial and industrial security, and USR is the platform on which the company will delve into it. “Really, USR, across the board, met every criteria we had established: It has a very defensible set of products, with a wide range of patents; it has a very interesting and unmatched business model; it has a very strong management team; and it has been undergoing a high growth rate and we saw no reason for that to end.”

USR executive VP Wesley Foss said that while USR got into security with its GRAB perimeter barrier, “we now typically handle anything regarding perimeter security, from fencing and barriers to cameras and motion sensors.”

The company has moved from being primarily a supplier of product to a full-fledged integrator. “We’re getting involved now on the front end, handling the design aspect of the project, and then we spec in the products that are best in class,” he said. “Then we go all the way through the implementation stage.”

The company has recently hired a number of engineers and software programmers, he said.

Spengler said S&W is as enthused with the security market as a whole as it is with USR, and that the company is not merely dipping a toe into the marketplace.

“I like the underlying dynamic of [the industry],” Spengler said. “I don’t think the world is going to get substantially safer over the next decade.” Thus, look for more acquisitions and a bigger role for S&W in the commercial/industrial/government space.

As for USR, while it won’t be rebranding, it will be taking advantage of Smith & Wesson’s brand recognition.

“The one question we didn’t have to answer when we broke the acquisition news to the staff was: ‘Who is Smith & Wesson?’ It’s a 157-year-old company and everybody knows that name and ... I think there’s a lot of potential with both of our names attached to our products and services.”