Twice as nice

IR to buy second integrator
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Monday, September 1, 2003

PARSIPANNY, N.J. - Last year Ingersoll-Rand got a taste of what it is like to own a systems integration business and it appears that company officials liked what they saw in the new business venture.

By the end of August, the conglomerate expects to complete its second purchase of a systems integrator, buying Integrated Access Systems and its manufacturing arm Geoffrey Industries. The transaction comes nearly a year after Ingersoll-Rand bought Electronic Technologies Corp., an integrator that reported $40 million in revenue in 2001 and coverage throughout the United States with 33 offices at the time of the purchase.

While Integrated Access Systems is a smaller deal when compared with ETC, since Integrated Access Systems has eight offices predominately in the East and revenues of $27 million, it still represents an important strategic move on the part of Ingersoll-Rand.

Not only is Ingersoll-Rand acquiring another systems integrator that will bring its security locking and access control products to market, but the deal is also unique since it includes manufacturing entity Geoffrey Industries. Ingersoll-Rand officials plan to use Geoffrey Industries’ access control expertise to enhance its Interflex access control product.

Jack Mallon, whose company Mallon & Associates represented Integrated Access Systems in the deal, said the manufacturing component of Integrated Access Systems made the company stand out from others in the market. The transaction, he said, is part of Ingersoll-Rand’s game plan to expand their security service business.

“It’s a little unique with Ingersoll-Rand,” said Mallon, who also represented ETC when it was bought by Ingersoll-Rand last year. “A number of manufacturers just want to stay in the manufacturing area, but Ingersoll-Rand has a such a broad marketing clout that this is fully utilizing that broad marketing.”

Thanks in part to the addition of ETC, Ingersoll-Rand’s service business has grown considerably in a one year. In 2001, 16 percent of the company’s total revenue came from installation, service and after market contracts, said Paul Dickard, spokesman for Ingersoll-Rand. By the end of this year, revenue from service related business is expected to grow to 25 percent.

Eli Lustgarten, managing director of research for H.C. Wainwright & Co. in New York, concurred that the acquisitions are also part of Ingersoll-Rand’s strategy to be more than just a supplier of products. “It’s fine to be a supplier of a system, but they also like the service aspect to it,” Lustgarten said.

What appeals to Ingersoll-Rand is the recurring revenue, said Herbert Henkel, chairman, president and chief executive officer of Ingersoll-Rand, in a prepared statement.

With the acquisition of Integrated Access Systems, Ingersoll Rand should see a positive boost in its service business. The systems integrator recently reported revenues of more than $27 million and employs more than 140 people.

Plans call for Integrated Access Systems to become part of IR’s Security & Safety Sector and operate under the ETC business unit. Geoffrey Industries, a manufacturing division that makes access control boards, software, reader interfaces and digital video recorders, is expected to join IR’s Interflex business unit. That unit provides electronic access control, video management and electronic credential systems.

Terms of the transaction were not released. Officials from Integrated Access Systems deferred comments about the pending deal to officials at Ingersoll-Rand.