Security Business

JUN 2018

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44 Security Dealer & Integrator / June 2018 The Money Issue Integrator Connection or nearly 90 years, Guardian Alarm has prospered by following a time-tested growth strategy – expansion into select markets via purchasing smaller firms and then growing organically. Since Milton Pierce founded the company in 1930, Guardian has spread from its Detroit base to Cleveland, Toledo, Cincinnati and other Ohio cities. Today, Guardian provides compre- hensive security solutions to more than 120,000 residential and commercial customers, as well as medical monitor- ing services to 45,000-plus customers. "M&A is important to us because it allows Guardian to leverage company assets to drive investor value," says Tom Erhardt, the company's President and COO. "It is a significant piece of the company's plan to double in size over the next four to five years." Finding a Cultural Fit As Guardian's experience demonstrates, M&A is an excellent tool for moving into new security or medical monitor- ing territories. Greenfield expansion requires an upfront investment and the cash to support the new operation until RMR reaches the break-even point; on the other hand, acquisition produces an immediate RMR boost while deliv- ering advantages such as knowledge of local markets. By focusing its M&A activities on distinct geographic areas, Guardian has been able to consolidate duplicative services and gain economies of scale. e company increases the likeli- hood that its acquisitions will be suc- cessful by narrowing the field to firms with similar values and culture. For most of its history, Guardian has been a family-owned business, and it looks for family-owned businesses to acquire. Low attrition rates and high customer engagement typical of family-owned companies makes them excellent pros- pects for acquisition, while their shared values make them easier to absorb. "We seek companies whose vision and history reflect a commitment to delivering industry-leading service and to maximizing customer satisfaction at every level," Erhardt says. A representative sampling of the companies Guardian acquired over the last decade illustrates the compa- ny's preference for purchasing fam- ily-owned businesses. In Ohio, they include ADS Security Systems, with nearly 1,000 accounts; and Barco Secu- rity Services, with 3,000 accounts. Similarly, shared values also pro- vide assurance for companies seeking an acquisition partner. "Owners want to be assured that their customers will be transitioned to a service-focused company that emphasizes customer satisfaction as its top priority," Erhardt says. "ey also want to partner with a company who will value their existing sales, installation and service staff." Guardian's ability to fulfill these expectations gives it a competitive advantage over other companies vying for the acquisition. "If we can success- fully communicate to a potential target that 'our values are your values,' it goes a long way in ensuring that our offer will be accepted," Erhardt adds. M&A with Organic Growth One of the misconceptions about M&A is that it is incompatible with organic growth; in fact, a firm with an aggres- sive M&A strategy like Guardian's must also excel at organic growth if its investments are to pay off. Erhardt points to a number of areas that have been critical enabling Guard- ian to meet its organic growth targets. Technology is a major driver of growth in the security sector, and Guardian prides itself on being an industry leader in making new technology available to its many customers. Investment in technology on its own, though, is not enough. "Training is a vital part of the equation," Erhardt Building via M&A Guardian Alarm's path to profits is built on a solid acquisition strategy complemented by organic growth by John Robuck Tom Erhardt, President and COO at Guardian Alarm, works with Capital One as his company continues to expand via M&A. F

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