Convergint Exec Dan Moceri Details ‘Financial Partnership’ With Ares
Moceri, executive chairman, speaks to SSI about Convergint’s new relationship with private equity behemoth Ares Management. Aside from more growth, could an IPO eventually be in the offing?
Is the New Year off to a hot M&A start or what? As consolidation marches on in the manufacturing sector, the systems integration arena is abuzz on news that Convergint Technologies has struck a deal with one of the world’s largest asset managers.
Los Angeles-based Ares Management holds approximately $106 billion in assets worldwide, and now its private equity group counts Convergint among its portfolio of global companies. The deal marks Ares’ first entry into the systems integration business. In 2016, the firm sold its interest in Nortek when that company was acquired by Melrose Industries.
Convergint’s now former financial relationship with KRG Capital Partners was certainly a fruitful one. The Denver-based private equity firm supported Convergint’s strategic vision, helping the integrator enter new markets, such as government and banking, as well as increasing its geographic footprint. That includes expansion into Asia and Europe, and the completion of 19 acquisitions all told.
I spoke with Dan Moceri, executive chairman and co-founder of Convergint Technologies, about the transaction with Ares and the company’s path forward.
How will Ares help Convergint further pursue its strategic growth initiatives?
First of all, I want to recognize that KRG was an excellent partner for us. For the time that we were with them we had all the resources and the expertise that we needed. They were just a fantastic partner. This was not to change partners for the sake of going with something bigger, but it was just time with KRG.
KRG helped us to expand globally, but they had more limited resources. They are just in North America, whereas Ares has a global footprint. The global account business we have is growing quite rapidly. We are very excited because we see an opportunity with Ares to help us to continue to grow on a global basis.
They have resources particularly in Asia and resources in Europe, which will continue to help us build out our service footprint in those areas. That is one of the key areas that we are going to focus on — working with them in terms of whether we do a greenfield or acquisition really depends on what is available at the time.
What level of international growth has Convergint experienced recently?
If you go back roughly three years ago, we were doing about $80 million on a global basis. Today that number is north of $240 million. We expect to have similar growth continue over the next 3 to 5 years as well.
In Convergint’s announcement, the transaction with Ares was referred to as a ‘financial partnership,’ not an acquisition. Why?
A lot of times ‘acquisition’ connotes other things, like a company is going to come in and take over. That is not the situation here. They truly are a financial partner. As KRG was, and as our previous financial partners were.
When we look at the full situation and when we were working with KRG to find another financial partner that is exactly what it was. Whether someone wants to coin it ‘an acquisition,’ they obviously acquired the interests that KRG had, but we look at them as another strong financial partner. There is a significant investment from the leadership team of Convergint, but when Ares comes in they are not looking to manage a company on a day-to-day basis. They are very much dependent on the existing leadership team that exists today.
We really look at it as a financial partner coming in to help us do exactly what we have been successful in doing the last five years with KRG. And not having somebody come in here and tell us how the business is going to be run. That was very important in picking the next partner.
Can you shed some light on the auction process? Was there a lot of interest from other private equity firms?
We have been working on this over the past year with [financial services firm ] William Blair to find the appropriate financial partner. All of the people that we looked at and participated in, these were financial sponsors. It did not go out to any strategic companies. They were all financial sponsors. [The auction was held] over the last year and in particular over the last five months in earnest working with William Blair.
What can you say about how private equity industry views the security industry?
There was significant interest. Private equity looks for good companies in good markets. And growing companies in growing markets. Obviously, the security industry has been a pretty robust industry for a long time and it is projected to continue to grow pretty nicely. Certainly higher than what the GDP growth is.
We are in an attractive industry, and then we have been very fortunate that Convergint has grown very nicely over that same period of time. We had two of the key things that they were looking for, which is a profitable and growing company in a growing industry with a pretty strong leadership team. That has been very key to our success; we are absolutely blessed with one of the best leadership teams in the industry. You put all that together and we become a pretty attractive partner to the financial sponsor community.
In light of ADT’s public offering, what might we see from Convergint in the future? Is an IPO possible?
It may and it may not. Some people had suggested it this time around that it would make sense. But I think there are plenty of other opportunities out there [through] the financial sponsor route. At some point, do we get to a certain size which necessitates doing that? That is totally a possibility.
To be real frank, we never really looked long term. We have always tried to build a long-term, successful company that can sustain itself on a long-term basis and do the right things for the colleagues [Convergint employees]. When it gets to a point that we have a need to look for a new financial partner or it’s time to move on, then I say we evaluate what are the options that exist in that point in time and which are the ones that make the most amount of sense.
We are obviously growing at a pretty healthy clip. We are doing that with a financial sponsor. If we get larger again and it’s time to find another sponsor, then we will certainly evaluate it at that point in time. But does it make sense to go to an IPO? We will answer that down the road because right now we are extremely happy with the situation we have with Ares.
Is there anything else you would like to say about the deal?
Part of the reason we are excited about Ares, which was the same reason with KRG, is Ares in particular understands the Convergint culture. They did a lot of work to understand what makes Convergint successful. As we have talked over the years, we have a very strong service-focused culture. We spend a lot of time focusing on our colleagues and helping them grow. And then we obviously focus on the customer and then we feel everything else kind of shakes out from that.
Ares did a great job to understand that culture, and they actually have a very similar culture to ours, which is the same thing we look for when we go out acquiring companies. The No. 1 thing we vet them on is the culture. Do they have a similar service-focused culture? That to us really helps ensure a successful relationship in the future. Ares has as very similar culture to Convergint and as a result we are very confident they are going to turn out to be a great financial partner for us.
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