Ultrak avoids the pitfalls of the popular growth strategy of the '90s

Mar 1, 1997 12:00 PM, By TINA D'AVERSA-WILLIAMS

Several years ago, when AT&T bought NCR (National Cash Register) they dropped the reputable NCR name, leading to loss of brand awareness and, ultimately, loss in profitability. Fortunately, AT&T saw the downside of the strategy and not only changed the name back to NCR but also allowed NCR to operate independently. The subsidiary is successful again.

Mergers and acquisitions - all the rage this decade - are good growth strategies, but they can be costly. To avoid the pitfalls, companies are paying more than ever for financial advice. Financial experts agree that the mergers and acquisitions of the '90s are more strategic and calculated than ever before.

The security industry is no stranger to the merger and acquisition trend, which shows no signs of slowing; middle-market deals are continuing at an alarming rate. Companies are facing the constant challenge of growth while maintaining or cutting costs. To expand product offerings and reduce research and development costs, security product manufacturers are targeting private, middle-market and small, family-owned companies. And industry outsiders are buying security companies to break into a growing market.

A successful growth-through-acquisition strategy is illustrated by Ultrak Inc. (NASDAQ: ULTK). Founded as a subsidiary of Network Security, Ultrak was purchased by security industry veteran George Broady in 1988 when Swiss-based Inspectorate International acquired Network Security. Broady, Ultrak president and CEO, sought to build the company through partnerships with employees and clients. Ultrak designs, manufactures and markets closed-circuit television (CCTV) and related products for use in security and surveillance; industrial, mobile video; traffic management; and dental and medical applications.

In 1995, Ultrak embarked on a plan to dominate the security market through acquisitions. Our strategy is to acquire companies that have superior products and technologies, as well as companies that provide us with distribution channels in the CCTV and related product markets where we currently do not have a presence, says Broady.

Listed by Forbes magazine as one of America's 100 best small companies, Ultrak has grown through a series of acquisitions while maintaining financial strength through secondary stock offerings. Ultrak has made seven major purchases in the last two years, driving sales to an estimated $136 million in 1996.

Most recently, Ultrak announced its intent to acquire Monitor Dynamics Inc. (MDI). Monitor Dynamics is a well-respected, privately held company that designs, manufactures, markets and sells high-end security and access control systems. Led by Gary Clinard, president, and Jim St. Pierre, vice president of marketing, MDI is best known for the SAFEnet integrated system. SAFEnet can be customized to site requirements and acts as a deterrent as well as a response system.

MDI's client base includes the Secret Service, Food and Drug Administration, U.S. Department of State, U.S. Navy, Marines, GM, Texas Instruments, Caterpillar and NationsBank. According to Broady, MDI plans to integrate the Maxpro Systems high-end CCTV management system into SAFEnet so that all access control products benefit from Ultrak's CCTV technology.

The Perth, Australia-based Maxpro Systems was part of Ultrak's rapid growth in 1996. Other companies acquired last year include Lenel Systems International, Fairport, N.Y.; Groupe Bisset, Paris; and VideV, DYsseldorf, Germany. Maxpro's CCTV management systems feature a computer-controlled matrix video switching system and alarm network, and the company's products serve in large installations such as city surveillance, office buildings, casinos, prisons and military bases.

According to Clinard, MDI's technical expertise, customer base, reputation and profitability will combine with Ultrak's domestic and international sales and marketing presence, distribution channels and financial performance to position Ultrak as the leader in the security industry. The sale to Ultrak is valued at more than $25 million.

Diamond Electronics is another notable Ultrak acquisition. A manufacturer of specialized commercial CCTV dome systems used by large retailers and municipalities, Diamond Electronics provided security surveillance during the 1996 Olympic Games. The company's line of high-speed pan-and-tilt dome systems has recently been upgraded for quieter and quicker operation, which is achieved via joystick or computer program.

How could Ultrak do so much so quickly? The reason for Ultrak's quick success involves a combination of factors, says Broady. First, our technology innovations are based on quality products that make a difference. We develop those products after listening to our customers, and speed and flexibility are a way of life at Ultrak. Second, we have a relentless commitment to customer service. And finally, our success can be attributed to a unique partnership philosophy that attracts and keeps great people. Everyone pitches in to get the job done, and everyone shares in the company's profits.

In response to its rapid growth, Ultrak announced a unified sales and marketing strategy in January 1997. The company will no longer sell directly to end-users but will be organized into three geographical regions that service distributors, dealers and national accounts.

(All stock market and financial data is believed accurate at the time of this printing but is not warranted or guaranteed by Access Control and Security Systems Integration.)

Offering analysis and commentary on the security industry at large, our goal is to keep readers informed of the market growth and forward move-ment within the industry. The column is authored by Tina D'Aversa-Williams, publisher of Access Control and Security Systems Integration, whose background includes work in market research and analysis.

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