Case Study

Growing Security Guard Company with a niche in health care space

Case study

Greg DeSimone recently assisted the owner of a security guard company with the sale of his business. Security guard companies tended to get lower industry valuation multiples, while a similar industry, temporary staffing, tended to get higher valuation multiples. 

Greg, after learning about this specific business, the value pitch they made to their clients, how it operated and the targeted services they provided caused Greg to reject the stereotypical pigeonholing of the company into the security industry and reframed the business.  The buyers agreed.

What made the business attractive to Buyer?
  • Company developed a method of providing on-demand staffing using scheduling software, unique to the business.
  • Diverse customer base including the largest hospitals in the Boston area
  • Experienced management team which did not depend on the owner for daily decision making.
  • Rapid revenue and EBITDA growth, including 2020
  • Buyers wanted to pigeonhole the business as a Security Company rather than a Staffing Agency.
  • Some buyers viewed the growth as COVID related and thus not sustainable
  • Rapid growth challenged internal resources
When did Greg first meet the owner?

Greg DeSimone was introduced to the company’s fractional CFO, who had worked with us on another transaction.  After getting to know the business, Greg provided management with an estimated range of values for a sale transaction based on the financials and made suggestions on what was needed to achieve his value target.  Rapid growth continued even as COVID eased and the seller sought guidance on the right time to market the company.

Why did the owners want to sell?

While only in his early 60s, the owner wanted to decrease personal risk while protecting and diversifying his family wealth. He had spent five years building a management team while removing himself from daily operations.  He felt the time was right to find a buyer who would leverage his management team to move the business to the next level.

Who was the buyer?

Greg DeSimone negotiated a seller friendly letter of intent for the purchase of the company’s stock by a Private Equity Group with a track record of success in expanding similar premium security businesses to multiple cities.

How did Greg meet the ultimate buyer?

The buyer was referred to Greg through our network of Buyside Acquisition Representative (BAR).  We discussed the parameters of the opportunity, and he referred several private equity groups which were a strong fit.

What about industry buyers?

Multiple industry buyers expressed interest in the opportunity.  All viewed it as a traditional security firm, rather than a dynamic staffing company.  The industry buyers who submitted Indications of Interest provided bids roughly two thirds of the ultimate value.

Successful results

Greg DeSimone assisted with the valuation, marketing, deal negotiations and due diligence necessary to bring about a deal with a team of experienced security professionals backed by a billion dollar equity fund.

The Process

Greg marketed the business to Industry Buyers, Private Equity Groups and Buyside Acquisition Representatives.  In total, over 600 hundred buyers were contacted. We received 60 signed Non-Disclosure Agreements from buyers interested in reviewing detailed information.

Greg prepared an initial presentation highlighting strengths, successes and synergies the Company brought to the table. The presentation also provided big picture financial information and other key data to create interest and downplay perceived risks while maintaining seller confidentiality.  Greg then worked closely with each buyer to answer initial questions after reviewing the package.

Greg encouraged each buyer to submit a timely indication of interest letter (IOI) with the goal of having the seller select the most attractive buyers for more detailed conversations over the following two weeks.

In all ten buyers provided Indications of Interest of varying valuations.  Greg worked with the buyer to select three for further discussion.

The top three groups met the owner via zoom and discussed their plans for acquisition as well as asking questions of the owner.

Greg negotiated a seller friendly letter of intent for the purchase of the company’s stock by a Private Equity Group with a track record of success in the security industry.

Greg provided the seller with an introduction to an experienced transaction attorney to assist with the stock purchase agreement, an equity ownership agreement in the new entity and a consulting agreement.

Greg worked with the company’s CPA and CFO through the extensive due diligence performed by a national CPA firm and a large national law firm.

The transaction provided the seller with a deal 60% higher than the owner anticipated when he went to market, with cash at closing making up 80% of the total transaction. In addition, he received an attractive one year earn out and an equity opportunity in the platform company.