Lenel Unites With United Technologies

HARTFORD, Conn. — United Technologies Corp. (UTC) says it plans to acquire security system software developer Lenel Systems Int’l Inc. in a purchase worth $400 million. The purchase, which is subject to regulatory approval, is expected to close in the coming months.

Under the deal, announced March 21, Lenel will remain an independent entity and report to Olivier Robert — president of UTC’s fire and security company Chubb. Paul Talley, vice president of Cascadia Capital and head of its security practice, helped broker the deal for Lenel and says Robert’s supervision will be a plus for dealers.

“He really understands the service side of the security industry,” Talley says. “You’ll see more of a service orientation.”

Elena and Rudy Prokupets founded Lenel, which employs 150, in 1991. Talley, formerly an installer himself, remembers installing the first Lenel systems and says he and the Prokupets began discussing strategic options for the business in the middle of 2004.

“We looked at who was there and who had an initiative and were going to be aggressive in this space,” says Talley, who adds UTC and Lenel have a natural chemistry. “All those pieces were a great fit. I’ve known Rudy and Elena since they started the company so it’s exciting to see it grow up.”

Industry financial expert Jack Mallon — managing director of Mallon Associates, a division of C.E. Unterberg, Towbin — calls the $400 million purchase a “very rich price,” adding it amounts to more than five times Lenel’s yearly sales.

“It shows you what a software company can command and bodes well for future acquisitions,” says Mallon, who adds the acquisitions show UTC is making a commitment to the electronic security industry.

“They will be formidable competition for the big players, namely General Electric and Honeywell,” Mallon says. “They show signs of wanting to be an 800-pound gorilla in this space and they have the resources to do so.”

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