FARMINGTON, Conn. — UTC Climate, Controls & Security has sold its U.S. fire and security operations to private equity fund Comvest Investment Partners, the company announced this week. Terms of the deal were not released.
The new business will be called Red Hawk Fire & Security. Two familiar industry veterans will lead the company: Mike Snyder, former president of ADT, will serve as CEO; Dean Seavers, former president of GE Security and SimplexGrinnell, will serve as president.
The acquired business, with approximately $250 million in sales, 1,350 employees and 40 locations, was formed as a result of a roll-up of Red Hawk and several other small firms. UTC acquired Red Hawk in September 2006. In April 2011, UTC aligned its fire and security services business in the United States under the Chubb brand. More reorganization soon followed, which included the combining of the Fire & Security business and the Carrier heating and cooling units into one division called UTC Climate, Controls and Security Systems.
Snyder tells SSI that UTC struggled to make the fire and security businesses operate efficiently, and ultimately UTC preferred the manufacturing-indirect distribution model of Carrier versus a more vertically integrated approach. Snyder says that his and Seavers’ immediate challenge will be to understand all of the competencies in the organization and determine the best ways to bring them to market.
“This is an amalgam of nine acquisitions. Each individual company has really strong competencies that may be specific to its individual market but can be easily [replicated] or built on across the country,” he says. “Their total capabilities have not had that national [reach]. What we intend to do is find those centers of excellence and build them out nationally.”
In its current form, Red Hawk Fire & Security specializes in upper middle market integrated systems that require expertise in custom design and build, project management, managed recurring contracts, as well as providing maintenance, inspection and other backend services, Snyder says.
“We will certainly look to expand our reach in middle market monitoring, which will include video. What we’ll do is broaden the offering to more segments. We’ll diversify into more commercial/industrial, retail and so on, beyond some of the narrow niches that the company started in,” he says.
The upper middle market client will remain Red Hawk’s sweet spot, Snyder says. And although the company does provide services to a number of clients with national footprints, a national accounts program is not in the offing.
“Our focus is really going to be going after that upper middle-sized customer location that sees value in all the things that we have to offer. Some of those locations will be national and some will not. But in terms of investing money to build out a full-blown national account program, that’s not going to be where we’re at,” he says.
ComVest has invested about $1.4 billion of capital in more than 95 public and private lower middle-market companies. The deal for Red Hawk marks ComVest’s entrance into the electronic security industry, Louis Colosimo, a partner in the firm, tells SSI.
Although he would not divulge any details of the transaction, Colosimo says his firm was approached by Snyder and Seavers, who both previously worked with an operating partner at ComVest.
“This particular area [security and fire industry] is new to us, but we know technology well and we have very strong people internally that know the business. We knew UTC was not really interested in staying in the business and we had guys that were interested in running it, so it worked out well,” Colismo says.
Colosimo emphasized that ComVest is behind Red Hawk Fire & Security for the long haul and will not be looking to simply sell it off at a profit.
“We are not a liquidator, so we are not going to liquidate the company. We see huge value in fixing what we think needs to be fixed and growing it. There are a lot of things we think that can be done differently. We are going to make this work,” he says.
Snyder, who hired Seavers at ADT before he joined SimplexGrinnell, described his working relationship with Seavers as “a partnering of equals.”
“Dean and I have complementary strengths, and we both have individual strengths. Dean is an excellent process and operations manager. There is not a better one in the whole industry,” Snyder says.
Seavers will be in charge of the operations on a day-to-day basis, while Snyder will run sales and marketing as well as handle all corporate support roles. A large emphasis will also be placed on product development and technology, as well as sales and distribution.
“I’m all about growth and Dean’s all about profitability. There is going to be a lot of stuff in the middle too. We have worked together for a very long time and we know each other very well. So the stuff in the middle we will collaborate on,” he says.
UTC has so far declined SSI’s request to comment on the transaction. When the deal was first announced, UTC Climate, Controls & Security President and CEO Geraud Darnis stated the company “is strategically reviewing its fire and security portfolio to focus on businesses with industry leadership, large scale and higher returns.”
Walter Bailey, managing director of New York-based Secure Strategy Group, LLC, says the sale of UTC’s fire and security branch operations likely resulted from UTC determining it was unlikely to ever achieve “a top-3 status as an integrator while simultaneously owning major equipment platforms.”
“We have seen situations like this in the past, for instance when Honeywell acquired Pittway and then subsequently divested HSM to avoid channel conflict. We see the Red Hawk integrator network that UTC acquired, as being similar to many integrator industry peers that did not have a strong base of higher margin recurring revenues, and therefore not the winning platform for an industry leader like UTC,” Bailey says.
Moreover, Bailey suggests that many of UTC’s product resellers saw UTC’s branch integrator platform as channel conflict. Regardless of the sale, he views UTC as remaining committed to the security industry given its strong business positions in building automation and controls, focusing on conveyance, environment and safety management.
“UTC’s long term success will be contingent on delivering market-leading client service and support, and integrating their technologies, clients and markets, while not marginalizing their respective businesses or driving away customer relationships due to bundling solutions versus selling best of breed platforms,” Bailey says.
Rodney Bosch is managing editor for SECURITY SALES & INTEGRATION. He can be reached at (310) 533-2426.