Private Equity Firm Seeks to Merge ASG Security, Protection 1
Apollo Global Management is in talks to buy ASG Security and Protection 1.
NEW YORK – Private equity firm Apollo Global Management is in talks to purchase ASG Security and combining it with another home security company it is acquiring, Protection 1, Reuters reports.
It is unclear if Apollo faced any competition for ASG Security; however, final bids for the security firm were due on May 11.
Meanwhile, Reuters reported in February that Apollo was in the lead to acquire Protection 1 from buyout firm GTCR for about $1.5 billion.
The deal, which is expected to be resolved in the next week, is valued at $2 billion, sources told Reuters.
According to Peter Giacalone, president of Giacalone Associates, a $2 billion price tag would indicate a multiple north of 50x, based on the companies’ combined $40 million in recurring monthly revenue (RMR). ASG Security has reported $10 million in RMR with 2014 gross revenues of approximately $145 million, and Protection 1 claims almost $30 million in RMR in 2014 with $468 million in gross revenue.
“This is what dealers like to see. A meaningful tell would be the multiple of EBITDA of the combined entities. This is a big deal and although people like to speak of the multiple of gross RMR, the financial professionals are more interested in the multiple of EBITDA,” said Giacalone, a contributor to SSI‘s “Monitoring Matters” column.
Although P1 and ASG have some overlap, they will also have expansion and significant opportunities to realize efficiencies through their synergies, Giacalone explained.
“Opportunities of consolidation of offices, corporate load, back office, central station, etc., would be meaningful with this deal. The other big question is what happens to CMS [Criticom Monitoring Services] should this deal consummate. I would imagine [P1] would hold on to the CMS property as it historically produced healthy free cash for the company,” Giacalone said.
Both CEOs of the companies to be acquired, Joe Nuccio of ASG and Tim Whall of P1, are highly respected executives within the industry, and it should be noted, both of them were associated with the legendary Jim Covert during the buildup of one of the industries major companies, HSM Electronic Security, Ron Davis, president of Davis Mergers and Acquisitions Group, told SSI.
“Both of them have put together extraordinary management teams, and regardless of which one, or perhaps both of them, remain with the company, it will still have a steady hand at the helm. While this is still not a done deal, the fact that it has been announced would indicate that it has come pretty far. I believe that when it does happen, it will probably trigger one or more other transactions between the industry’s largest players,” said Davis, an SSI Industry Hall of Fame inductee and “Big Idea” columnist.
Beltsville, Md.-based ASG Security, sells, installs, monitors and services intrusion and fire systems, home automation, access control, and IP/cloud-based video systems to residential and small commercial clients throughout the Eastern and Southwest United States. The company also provides services to high-end enterprise and government clientele.
The firm, which earned Security Sales & Integration‘s Installer of the Year (Large Company) in 2010 and numerous SAMMY (Sales & Marketing) Awards, does $140 million in annual revenues, has 215,000 customers, employs 1,220 people, and operates out of 25 locations with three monitoring centers.
2014 Installer of the Year winner Protection 1 of Romeoville, Ill., provides intrusion, fire protection, access control, video surveillance, and electronic security alarm monitoring and maintenance services for residential and commercial markets. The firm was purchased by GTCR, a Chicago-based private equity firm, for $828 million in 2010.
The transaction marks New York City-based Apollo’s first entrance into the security industry. According to its Web site, Apollo had assets under management of approximately $163 billion as of March 31 in private equity, credit and real estate funds invested across a core group of nine industries.
Among the portfolio of companies owned by Apollo are Claire’s, Great Wolf Resorts, Caesars Entertainment Corporation, Norwegian Cruise Line, and Realogy (Coldwell Banker and Century 21 Real Estate) and CORE Media Group.
SSI continues to report on this developing story.
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