Protection 1 on Tuesday announced that it has entered into an agreement to be acquired by Apollo Global Management. According to the company’s top executives, being acquired by the private equity firm will better position it to command a greater share of the $46 billion security monitoring industry through both organic growth and acquisitions.
In addition, funds managed by affiliates of Apollo also announced the concurrent signing of agreements to acquire Maryland-based ASG Security, which will be combined with Protection 1. The newly created company, which will continue to operate under the Protection 1 brand, enables Apollo to enter the security monitoring industry with a company generating a combined $40 million in monthly recurring revenue and total annual revenue well in excess of $500 million. Terms of the transactions, which are expected to close in mid-2015, were not disclosed.
Both Protection 1 and ASG Security will be headed up by Protection 1 chairman and CEO Timothy Whall.
“The acquisitions add size, scope and new markets into the newly combined entity,” said Whall. “It also brings a lot of new talent - new sales personnel and a lot of branch personnel. In terms of density, you’ve got a full service company that does residential, commercial and national accounts. ASG has done a great deal of work in the government sector, so they are very complementary businesses coming together.”
The combination of Protection 1 with ASG also means an expanded geographic footprint for the combined entity in markets where the companies did not compete with one another and increased density in regions where they had overlapping business.
“This means we will be able to service accounts better,” explained Whall. “Our technicians on the road will not have to drive as far. Our reps will be able to get to more accounts in a shorter geographic space, so it is kind of a two-fold win: You get a win by getting into markets you hadn’t previously been in and, of course, you get great density in the areas where both markets were served.”
The acquisitions are Apollo’s first foray into the security market which Whall believes is a positive sign for the industry as a whole.
“Apollo has obviously taken a great interest (in security). I think that is great for the industry,” added Whall. “They’ve taken two very large companies and decided to combine them as their entry point. I think they followed the industry from afar and liked the recurring revenue business model. Also, I think they studied the industry and got comfortable with the financial characteristics. It is a business where the capital deployed goes right into acquiring customers and it is a business that is fairly low in terms of the capex reserves that are necessary, so I would think those are attractive industry characteristics.”
“This is a very large private equity firm that really understands the characteristics and the dynamics of our sector, which I think is really important, said Joe Nuccio, president and CEO of ASG Security. And, as I think about ASG and why we were attracted to them, it really was because of the future and what we think the future can be. When you think about ASG and Protection 1 together – two very likeminded companies thinking the same way – that platform combined with Apollo as a private equity firm, it makes the dynamics so very exciting in the industry.”
According to Jamie Haenggi, chief marketing and customer experience officer for Protection 1, with Protection 1 coming on the market, it really provided Apollo with the ability to enter the industry with a national footprint.
“It shows their interest in the ability to not only take advantage of recurring revenue and stable growth, but the opportunity for consolidation in the space,” she said.
Whall said that Protection 1 will also benefit from Apollo’s significant financial resources as they seek to execute their growth strategy moving forward.
“The size of the equity player that (Apollo) is… they are among the very largest which means access to capital is readily accessible for them to write a very large check,” added Whall. “Where some firms may look at a deal and think there’s not the financial resources out there to do it, Apollo looks at the deal and sees if the deal makes sense and they are not restrained by financial resources. In that regard, I think they are a great entrant into the market. “
In the short-term, Whall said the company will continue to grow their business within the markets they currently operate in and over the long-term, he said that they will likely make more acquisitions.
