LAWRENCE, Kan. — Protection One (P1), one of the industry’s top three providers of installed and monitored electronic security systems and services, substantially added to its market share by acquiring Integrated Alarm Services Group (IASG) in late December. The deal rumored to be worth $85 million, involves IASG being exchanged for .29 shares of P1 common stock, which gives IASG shareholders about a 28-percent stake in P1.
The IASG acquisition, which includes systems integrator Protection Service Industries (PSI) and third-party monitored services provider Criticom Int’l, greatly enhances P1’s retail sales, installation and monitoring businesses, and positions it as the industry’s highest volume wholesale central station business.
In P1, IASG found a buyer that mirrors itself in many ways. Founded in 1988, P1 rode the mass marketing wave to rapidly become one of the industry’s largest operators, but by the end of the 1990s it found itself in disarray. Under the guidance of President and CEO Richard Ginsburg, P1 turned its fortunes around. IASG management decided that experience made P1 a good fit for its shareholders.
“IASG got a little ahead of itself by going on an acquisition spree, which was done prior to putting the necessary infrastructure in place,” Charles May, IASG’s outgoing president and CEO, told Security Sales & Integration. “Protection One had gone through similar problems and already had in place what IASG needed.”
SSI recently spoke with Ginsburg to surmise how this transaction came together, what it means for P1, its effect on both the company’s retail and wholesale customers, and its overall impact on the industry.
What attracted P1 to IASG and vice versa?
Ginsburg: IASG has similar issues to what we had five years ago — they were put together through a lot of acquisitions, which makes integration and tending to customer service needs and attrition a difficult task. We had just been through one of the largest restructuring challenges in terms of finances and organization ever seen in the alarm industry, so they knew we could get it done. We were attracted to IASG because we have succeeded in overcoming the problems they were facing.
What streamlining do you foresee?
Ginsburg: The central stations complement each other, and I am a big believer in having multiple stations. IASG’s installation arm complements what we have as well. We estimate there will be about $11 to $13 million in combined cost savings, which will mostly come from administrative areas and eliminating the duplicate costs of running two public companies.
How do you sell wholesale monitoring to competing installation firms?
Ginsburg: We are very open with the dealers and make no mystery about it. It is not as big of a detriment as some might think. We have owned the wholesale business for more than a decade, and we believe there is so much business out there that it does not matter. Plus, we can provide some of the benefits that come with our size.
What were the keys to successfully resurrecting P1?
Ginsburg: Daily blocking and tackling — understanding customers’ needs and servicing them quickly. Billing has to be accurate, monitoring has to be quick … it is not that complicated. Once you make customer service No. 1, it is not that hard. Some of our people worked some 20-hour days to get where we are, but I was always confident if we stuck to our plan we could turn things around and fix what was broken.
How does this deal position P1 in the marketplace? How does P1 differ from ADT and Brink’s?
Ginsburg: On the wholesale side, with our CMS unit and IASG’s Criticom, it creates a business with the No. 1 market share, probably twice as large as the next competitor. This is totally separate from P1’s installation business. It also gives P1 a lending business, which IASG had. On the retail side, it adds about $4 million of RMR.
The goal is reducing attrition and improving customer service metrics. Five years ago, our attrition was 18-20 percent, now it is 11-13 percent. We are always trying to improve it. In many cities, we have cut attrition in half.
P1 will now have 1.6 million customers, while ADT has about 6 million and Brink’s has around 1.1 million. It moves the top three further away from the pack of other providers. We are different in that we are also in the wholesale business. We are also in the multifamily business, which they are not.
P1 has also been quietly building a national commercial accounts business. I believe P1 has more of an entrepreneurial approach because this is all we do. We are the largest pure-play security installation/monitoring company out there.