Tri-Ed/Northern acquired by private equity firm

Audax Group acquires, Comunale says goal is to build a 'billion dollar business in 3 to 5 years'
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Wednesday, April 4, 2012

Updated with quotes from Pat Comunale at 12 p.m. on April 5.

BOSTON—Audax Group, a $5 billion private equity firm based here, announced April 4 that it has acquired Tri-Ed/Northern Video.

"We're really focused on becoming a billion dollar distribution business," Pat Comunale, CEO and president of Tri-Ed/Northern Video told Security Systems News. "It took five years to double the business the first time around. We think we'll be there [at $1b in revenue] in another three to five years," he said. Comunale confirmed that Tri-Ed had $100 million in revenue in 2005. He declined to name current revenue figures, but several sources say the company had about $400 million in revenue in 2011.

Terms of the deal were not announced. This is Audax Group’s first investment in the security industry, although “we have spent a lot of time generally with the value-added distribution business,” Jay Mitchell, managing director of Audax, told SSN.

“We very much like the dynamic [of the distribution business and the security industry],” Mitchell said. “There is a lot of organic tailwind to the business that Pat [Comunale] and Steve [Roth, chairman of Tri-Ed/Northern] have built."

The April 4 announcement comes just two years after the March 2010 deal in which Brazos Private Equity Partners, a Dallas-based private equity firm, bought two prominent distributors—Tri-Ed Distribution and Northern Video Systems—and combined them. The combined entity, Tri-Ed/Northern Video, is the largest independent distributor in the security industry and a competitor of ADI, the industry’s largest distributor.

A call to Brazos seeking comment on the deal was not immediately returned.

Mitchell said Audax “was presented with this opportunity back in the fourth quarter of last year. We met the management team in December and were immediately attracted to the business. Pat and Steve [who were formerly with ADI] helped build ADI into the leading player in the space and they have a proven track record, under Brazos, building Tri-Ed/Northern into the leading independent distributor.”

During the past two years, Tri-Ed/Northern has made a number of small acquisitions to increase its footprint. Most recently, it acquired Video Surveillance Specialists on the West Coast. It also recently opened a new office in Atlanta.

The new owners will continue this growth strategy, Mitchell said.

“There will be no material changes whatsoever other than to accelerate the growth primarily through acquisitions, but also through organic growth as well,” he said. Audax wants to help “build a footprint to better service integrator partners, particularly the larger folks with a national footprint.” Even on "Day One of ownership," Audax is looking at some acquisitions and greenfield opportunities "in select geographic markets," Mitchell said.

Comunale said Audax has been successful in the past with its "buy and build strategy ... I think you'll see additional acquisitions happen within the next 60 days."

Imperial Capital’s John Mack, who has worked extensively with Roth and Tri-Ed/Northern in the past, called the Audax deal “a good benchmark for the industry.” How a distribution company is doing is a good indication of how the security industry is doing, he said. That Tri-Ed/Northern is growing, working with a “well-established PE firm with a good reputation [like Audax]” and providing another distribution alternative for dealers and integrators “is a further benefit for our industry.”

Harris Williams & Co. advised Tri-Ed/Northern. Kirkland & Ellis LLP served as counsel to Audax Group. Bank of America provided senior debt financing and Oaktree Capital Management LP provided junior debt financing to support the transaction, according to Audax.