Apollo Global Management of New York will purchase both Protection 1, Chicago, Ill., listed at No. 6 on the SDM 100, and ASG Security, Beltsville, Md., ranked No. 10 on the SDM 100.
While details are still being revealed, the value of both companies, if combined, is approximately $2 billion, according to Reuters.
Barnes Associates Inc., advisors and consultants to the security alarm industry, advised Apollo during the acquisition. "It was a great experience," said Michael Barnes, founding partner of Barnes Associates. "[Apollo Global Management] are wonderful to work with, and very smart and decisive. They really understand the industry and clearly see that Protection 1, particularly with the addition of ASG, is a great platform for doing something in the space. I am sure this is only the beginning of their commitment to the industry."
Although the price and terms were not announced, Barnes calls the speculation of a combined $2 billion or so a good estimate. "It is another important validation of the opportunities in the industry," said Barnes. "Apollo is extremely large and can pursue investment opportunities virtually anywhere on the globe. The fact that they decided to put this much capital to work in the U.S. security alarm industry makes a strong, positive statement."
Barnes said the two companies will be worth more combined than what they were purchased for individually. "Both P1 and ASG are super well managed, and strong performers," said Barnes. "The brilliance in these transactions is the combination. They fit incredibly well, and will very quickly result in performance that is exceptionally good relative to the combined price." He continued, "Tim [Whall] and his team at Protection 1, particularly enhanced with the ASG team, have huge bandwidth… and of course Apollo has a huge amount of capital. I am sure we will see them continue to build and piece together the right combination of capabilities."
Barnes said combining the two companies affords a number of high-value synergies while validating the model on which much of the industry was built. "There are a number of complementary aspects to bringing the customer origination capabilities of both companies together," said Barnes. "Collectively it offers a very deep capability covering a huge part of the end-user spectrum, including everything from low-cost, entry-level residential all the way up to very large commercial and institutional offerings — and all of this across most of the country. The security alarm company has a material commitment to specific geographic markets and is able to service most all of the residential, commercial and institutional customers in the area. This breadth of capability has a level of marketing and operating synergy that is not available to companies that concentrate only on one segment."
Barnes said to expect more private equity groups showing interest in the industry and buying into capable alarm companies. Stressing the importance of this deal, he said, "However, it is unlikely that the opportunity for two large companies, with such compelling possibilities when combined, will present themselves and be acquired in this fashion again anytime soon."
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