With the ink barely dry on its deal to buy Reliance Security Services, Securitas was on the acquisition trail again come mid-January when SMT Online broke the news that UTC Fire & Security (a business unit of United Technologies Corporation) had agreed to sell the Swedish giant its own UK guarding business, Chubb Security Personnel, itself valued at a cool GB pound 31 million.
Operating through 19 locations in the UK, and with an employee base of around 5,000 dedicated and skilled workers, Chubb Security Personnel serves both public and private sector end users, offering them permanent and temporary security guarding solutions.
Analysts would rightly concur that Chubb Security Personnel is a good, solid business performer, with current sales amounting to more than GB pound 100 million.
The company certainly boasts a well diversified contract portfolio, and has long enjoyed a stable customer base within its market.
Following on from the Reliance deal concluded last November, the Chubb buy-out (which is subject to the customary closing conditions and approval from the Office of Fair Trading) is expected to complete by the end of the first quarter.
The Office of Fair Trading Review takes place this month, with a standard 40-day review period set in motion from the day of Securitas’ formal submission to purchase.
Placing the business on a solid footing
What has prompted this latest – and soon to be decisive – flurry of fiscal activity?
“UTC wanted to see the business placed on a solid footing,” said Geoff Zeidler (UK and Ireland managing director at Securitas) in an exclusive interview with SMT Online.
“That’s where Chubb Security Personnel’s managing director Nick Savill and the team have been focusing their attentions. Ultimately, UTC was very keen that, should a transaction for the business come about, there would be a high confidence in the process being completed.”
UTC’s bosses will no doubt be happy in the knowledge that this deal – about which Zeidler said discussions had been “ongoing for some time” – looks to be a satisfactory one for both parties.
“There will always be a little nervousness among customers when deals of this magnitude are struck,” added Zeidler. “We’re fully conscious of that but, going forward, this transaction will allow Chubb’s end users, some of whom I’ve already spoken with, to have full confidence in the stability of their contracted security provision.”
Zeidler embellished the point by exalting that Securitas knows Chubb “very well”, subsequently pointing out that the latter concern “exhibits good management” and has “sound capabilities”.
Savill, of course, has also been talking to members of Chubb’s customer base about the deal.
“All contracts have some churn,” outlined Zeidler, “but Chubb continues to do a good job for customers.”
Remaining as a stand-alone business
Initially, at least, the post-deal ratification period will see Chubb Security Personnel remain as a stand-alone business.
There are definite sectors in which Chubb Security Personnel is strong. “They have a solid working relationship with Sainsbury’s, for example,” opined Zeidler. “There are certainly no issues whatsoever over financial stability. UTC merely wanted to sell to a long-term and committed owner.”
As a business, of course, Securitas solely focuses on pure security provision. The bundled services model is not for them.
Running alongside that philosophy is an oft-stated – and well-known – desire to be the Number One player across every guarding market in which the company is operational.
Once the Chubb deal is concluded, the scale of the combined Securitas business (also taking into account the Reliance operation) rockets the Scandinavian exemplar to the higher echelons of the UK guarding ‘Premiership’ with jet-like propulsion, fostering a commercial operation that truly rivals G4S in scale, coverage and capability.
“The UK is a very important market for Securitas,” suggested Zeidler who, ever since his appointment as UK and Ireland managing director, has made a massively important and positive impression within both the company itself and across the industry and client base it serves.
“We now have a genuine opportunity before us to lead the industry and promote and develop the profession of security. What we must now continue to deliver is consistent and high quality customer service throughout the integration period.”
Enhancing sector focus and specialisation
The integration period to which Zeidler refers involves taking both Reliance and Chubb under the Swedish operation’s collective wing.
“We’ll integrate Reliance and Chubb at the same time,” explained Zeidler. “We’re in a better position to do it all at once.”
The focus for Zeidler in terms of both transactions is “a greater ability to enhance sector focus and specialisation. Reliance was a big and bold statement on our part, and this deal takes matters a stage further.”
Speaking of the already-ratified Reliance deal, how are things moving forward? “Matters are progressing very well indeed,” ventured Zeidler.
Currently, there’s plenty of focus on supporting the Reliance people on the ground and “getting the basics right”.
Only recently, Securitas organised a joint Industry Leadership Management Conference with members of the Reliance operation, similar in scope and scale to the one played out at Stansted Airport back in October 2009.
“In the meantime,” suggested Zeidler, “we shall focus on enhancing the Reliance systems, impart the Securitas message all the while and outline the innovations we can bring to the party from Europe.”
What the Chubb deal means for UTC
The Chubb Security Personnel deal allows UTC Fire & Security to concentrate fully on its high technology content operations, supporting growth and efficiently fulfilling customer demand.
Parent company United Technologies Corporation boasts strong market positions in aerospace/defence and global infrastructure with a portfolio listing such names as Carrier, Otis, Hamilton Sundstrand, Pratt & Whitney and Sikorsky among its ranks. The company continues to invest in game-changing technology across the business.
Headquartered in Connecticut, UTC Fire & Security provides fire safety and security solutions to more than one million customers worldwide.
“From my point of view, the Chubb deal represents a further commitment to the UK market,” urged Zeidler.
“It’s a positive development that will enhance Securitas’ ability to bring global knowledge and specialised industry services to the UK and Ireland’s static and mobile security markets, and help those markets develop for the better at what is a critical time.”
Year-end results at Securitas
Moving on to the bigger picture for a moment or two, a week or so ago Securitas issued its full-year report for the period January-December 2010 and figures for the three months to the end of December.
For the latter, total sales stood at MSEK 15,718 with organic sales growth at 4% on an operating margin of 6.7%. For the year, recorded total sales are MSEK 61,340 on organic sales growth of 1% and a 6.1% operating margin.
Speaking about those results, Alf Goransson (president and CEO at Securitas) commented: “Even though its development in a few countries in Europe remains stagnant, the security services market is recovering. In the fourth quarter, our organic sales growth was 4%. Including a-cquisitions, though, the real sales growth in the final quarter of 2010 was 10%.”
Goransson made a point of stating that, in 2010, the bottom line improvement in operating income continued and reached 6%.
“Operating margin improved compared to the previous year in spite of a few major acquisitions serving to dilute it during the latter part of last year.”
In 2010, Securitas was involved with 15 major acquisitions totalling annual sales of approximately MSEK 4,100 and involving 19,500 employees.
“Favourable acquisition opportunities continue to present themselves in both mature and new -markets,” added Goransson. “We intend to remain active, and selectively take advantage of such opportunities as they arise.”
Through acquisitions and start-ups, Securitas is now present in 45 countries.
“We fully intend to strengthen our position in those countries where we are already involved, but also continue to expand geographically in order to serve our global customers.”
Goransson’s overriding ambition is for Securitas to be present in approximately 60 countries before the next three years have run their course.
Serious player in the UK market
With the acquisition of Chubb Security Personnel, as mentioned Securitas will strengthen its position to become one of the largest security services companies in the UK with approximately 17,500 employees.
The deal is expected to contribute positively to the earnings per share of Securitas as of 2012. Restructuring costs of something like GB pound 2.8 million are expected in 2011, and acquisition-related transaction costs of GB pound 1 million in the first quarter of this year.
It’s envisaged that the acquisition will dilute margins in Security Services Europe during coming years.
Concluding our conversation, Geoff Zeidler openly admitted that his operation will find itself in something of an odd situation during these next few days and weeks before the Chubb deal is signed, sealed and delivered.
“It’s almost inevitable that we’ll still be tendering against Chubb Security Personnel on some contracts,” he explained.
Security Management Today Online would like to thank Geoff Zeidler for his invaluable contribution to this article
