Earlier this week, Reuters reported that the private equity firm GTCR LLC has plans to sell Protection 1, Romeoville, Ill., ranked No. 6 on the SDM 100 Report, for more than a reported $1.5 billion. This news set off speculation by other news outlets, with some saying the firm planned to take the privately held company back into the public sector by way of an Initial Public Offering (IPO), stating the reports to sell it were incorrect. Others stood by Reuters’ report of a pending sale.
Sources, who preferred to remain anonymous, told SDM that GTCR is indeed negotiating with the help of an investment bank to sell Protection 1, but so far the idea of taking it public remains a rumor, one of the sources added.
The news of the sale has not come as a shock to seasoned industry veterans. “I would not be surprised if [GTCR] were selling it,” Lessing Gold, security expert attorney and a partner at Mitchell Silberberg & Knupp LLP, Los Angeles, said. “If they are selling it for the amount reported on Reuters, then they will be making a healthy profit on it, to say the least.” Gold participated in the formation of Protection 1 and assisted in taking it public years before its sale to GTCR. “Typically a private equity firm like GTCR would hold onto it, and then they would want to move on,” he added.
GTCR, in partnership with Timothy Whall, now Protection 1’s CEO, acquired Protection 1 in June 2010, and the public company was turned into a private one. The sale price was approximately $828 million, and GTCR assumed its debts.
When asked about the potential sale of Protection 1, industry veteran John E. Mack III, executive vice president, co-head of investment banking, Imperial Capital, who also served as CEO of Protection 1 from 1991 until 1999, told SDM, “I have only heard and seen the same reports that you have. It makes sense for GTCR to be considering a “liquidity event” for Protection 1 as they have been in the investment now for over four years and private equity investors usually have a three- to five-year horizon for their investments.”
While nothing is certain at this point, Mack pointed out, both ideas of GTCR either selling or taking Protection 1 public could co-exist. “Investors will often consider a dual track where they consider both an IPO and a sales process at the same time in parallel and then try and determine which solution will result in a high valuation and thus ultimately more money to the investors,” Mack explained. What would be better for GTCR? “There is a lot more under consideration here so this is simply not an easy answer. I would imagine they would prefer a sale at a good valuation,” Mack said.
When asked about the option of GTCR taking the company public, Gold replied, “I’ve not heard anything about the company going public at this time.”
Since its acquisition, the company, under Whall, has thrived and grown, it was named SDM Dealer of the Year in 2012, and it has acquired other security companies in its expansion, the most recent being the acquisition of Pacific Security Integrations Inc., in Hawaii, this spring.
If all reports are true and Protection 1 is up for sale, the buyer will receive a notably well-run entity, as proven by Whall and his colleagues’ hard work. In the last four years, Whall has made customer relationships and satisfaction a top priority for the company.
Neither Protection 1 nor GTCR representatives were available to provide comments at press time. We will continue to follow the story; please watch for updates to the article on SDM Newswire. Due to the sensitivity of the story, SDM’s unnamed sources requested their names be withheld.