Miami Investment Firm Aims To Build Security Empire

Apr 6, 2007 3:10 PM

           

Trivest Partners, a Miami-based private equity firm, has decided to build "one of the largest privately held security businesses in the United States," reports The Miami Herald.

According to the story, security guards have a "tremendous" advantage as business opportunities: the positions cannot be outsourced.

''With the advent of Homeland security, this appears to be an important part of our society for many years to come,'' says Trivest partner Jamie E. Elias. "It is not susceptible to outsourcing trends. It is not going to China or India because customers want the physical presence of a security guard walking the premises.''

The firm became interested in security guards after its research found that the U.S. security guard industry has $15 billion in annual revenue and an estimated growth rate of 5 to 7 percent, serving a customer base made up of governments, offices, malls, schools and residential developments.

Trivest officials say the industry is extremely fragmented, with 15,000 companies in the United States employing about one million guards. Elias says this means the guard sector is ready for consolidation.

To serve as a platform for its security business, Trivest recently purchased Allegiance Security Group, Fort Myers, Fla. The company has 11 offices around the country and serves 500 customers with more than 1,000 guards.

Jim Stevens, a 30-year veteran of the industry who has overseen 45 security business acquisitions, will be chief executive of the new platform. Elias is chairman.

Experts say Trivest faces many challenges to make the business work.

''Bigger does not necessarily mean better,'' says J. Patrick Murphy of LPT Security Consulting, Houston. He says the guard industry is plagued with problems, including poor training, low pay, heavy competition and high turnover. "Guards are somewhat nomadic. They are chasing the next 25 cents an hour,'' he tells the Miami Herald.
However, Trivest representatives believe it can be done.

''This is a minimum wage type of business, but so are McDonald's and Burger King, and quality management have made them work,'' Elias says. "It is very competitive, but that is also an opportunity to build scale.''

A number of security firms are already large employers in South Florida.

Securitas Systems, Stockholm, has 1,500 workers in Tampa. AlliedBarton Security Services, King of Prussia, Pa., employs 1,330 workers in South Florida. Kent Security Services, North Miami Beach, Fla., has 1,200 employees; and Vanguard Security, Miami, employs 1,400.

The industry consolidation Trivest is counting on is already going on.

Joseph Ricci, executive director of the National Association of Security Companies, says Securitas, Wackenhut, AlliedBarton and others are working to dominate the guard industry by buying smaller firms.

The Herald reports that businesses built by rolling up smaller companies have a checkered history.

''The reason most do not work is because there is more involved than just adding the revenues together,'' says Randolph A. Pohlman, dean of the business school at Nova Southeastern University. "As Jack Welch [former chief executive of General Electric] told us, 'Culture is everything.' And you can get a lot of different cultures in a roll-up.''

Yet, Pohlman says he knows from his own experience that roll-ups can work, if done with understanding to integrate cultures. He was the lead director of Clark Consulting, Chicago, which rolled up 26 companies, then sold out for $300 million to Aegon, a Netherlands conglomerate.

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