Security Sales: Why did you choose to buy a security company in Australia? Why Signature Security?

Jim Covert: When I decided to leave Ameritech, I still had the non-compete agreement with them which was effective in the United States. So I went to Les Gold and asked him to see what was out there. He found a company for me in New Zealand and I went to look at the opportunity. We were able to buy virtually $1 million worth of monthly recurring revenue as a starter base for a 20 multiple.

SS: With all the demographics, is there a higher rate of renters versus homeowners?

Covert: Actually people don’t move as often, so in residential, the turnover is much less. Businesses are virtually unpenetrated because nobody was offering leasing services until we got there.

SS: What are the commercial demographics?

Covert: Business is 99 percent outright sales. So if you own a small business and you want an alarm system, you’re looking at paying $2,000 to $3,000 because nobody’s offering it for $295 or $500.

SS: Is it true that there’s a high crime rate in Australia?

Covert: Yes. I started saying that the crime rates in Australia and New Zealand are two to three times higher than in the U.S.

Finally, the police commissioner in Australia was interviewed and forced to acknowledge that my numbers were accurate.

SS: What is the thought process of the alarm industry over there? How do they run their businesses?

Covert: The mentality of all the major alarm companies in that part of the world is that they are owned by man-powered companies so they must make a profit.

SS: Are you still acquiring in addition to the alliance part of your business?

Covert: Initially, we bought some hubs that were too small to be self-sustaining. We’ve bought other companies to make them profitable. Then we had some vacancies where we had to go out and buy major companies to become a major player in the marketplace. We are either in a letter of intent or under contract to all of those hubs so all I’m trying to do in the first 12 months, which will end March 14, is to establish all of our locations.

SS: Is there heavy private response there?

Covert: It’s all private response. You do have to have an alliance with a good patrol or response service.

SS: What is the total number of systems you have now?

Covert: We now are up to about 70,000 customers, maybe 80,000.

SS: In a perfect world, where would we hope to see Signature Security globally in five years?

Covert: In Australia and New Zealand, I think we will be a $100 million company with an acquisition rate creation multiple of 25 times to 28 times. I have no doubt now, if I have the energy to keep up with it, we could easily be a $300 million global company within 5 years to 7 years.

SS: Mainly we hear that manufacturers look globally, but the dealer side doesn’t look internationally. Is this true?

Covert: You’re right. To vendors who have come with us Ademco, DSC I take my hat off. They have not doubted for a moment that we were going to do well. That’s because they’ve been playing in those markets longer than I have and they know the status of things.

SS: Is making a solid link or contact with an existing company there one of the keys?

Covert: I moved my entire executive team. All of these guys have moved to Australia. Had we not moved and learned about the society and become a player in the society, we would not have been nearly as successful as we have been.

SS: The concentration seems to be on the residential and commercial alarms, what about the other parts of the industry and all the other disciplines CCTV, access, etc.?

Covert: We see CCTV and card access as just part of our commercial venture. We have an opportunity to bring those out as leased products. We have been hesitant to do so because we haven’t been able to keep up with our installation side just for what we’re doing on the low-end residential and commercial. Additionally, we don’t have the trained expertise for installation and service that we had in the U.S., so we’re spending a lot of time training and understanding policy and procedure.

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