Allied Universal, the largest security services company in North America, is planning to acquire G4S, a larger British competitor, to create an $18 billion goliath.
In this report, IPVM examines the deal, including:
G4S and Allied Universal Financials
Allied Universal growth
Allied Universal ownership and deal financing
Opportunity for international expansion
Growth and position in North America
Allied Universal CEO's comments on technology interacting with manpower
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It is interesting to see the convergence in the security guard industry. I currently have security guards working in my facilities, provided by a third party company.
My thoughts on this merger from an end user perspective are mixed. Bigger does not mean better when it comes to uniform security guard companies. I have found that customer service can suffer, especially if you don't employ that many guards.
These firms often try and sell you some sort of security technology technology at the same time that they want to supply boots on the ground. I use technology to replace people where I can, which is a huge cost saver in the long run. Over the length of a security contract, a security company might make more money from guard services than from a technology solution, unless they can build in an ongoing subscription service for "value added" options.
In those places where I do need a person, I need someone with a skillset in dealing with the public and in making good decisions. In today's environment, that means insisting that a guard gets paid a decent wage. My guard contract stipulates the rate paid to the guard, so that the security company could not short change anyone. This means that I get a better quality individual representing the security function, and have a very low turnover rate.
I have been in a situation where I fired a guard company, but had the new company hire all of the existing guards, as they were a good team, but the company customer service was terrible.
When I look at the security technology side, I find that my local integrators provide me the best options. They offer various solutions, various technology platforms, and don't have an agenda other than doing good work so that they get more work later.
I recently ran a competition for some camera work, and the big security firms came in considerably higher on price than the local security companies that I'm familiar with.
Maybe on some Macro scale, having a couple of huge firms generates some internal efficiencies for them that makes them more profitable. From my micro level, I don't see them a leaders on the technology side, but as companies that try to sell proprietary equipment/processes. I don't feel that they offer me anything I can't get better and cheaper somewhere else.
My guard contract stipulates the rate paid to the guard, so that the security company could not short change anyone.
This is good to see that a customer is mandating this. I have long held the belief that with any guard service you are paying $10/hr for a guard and $35/hr for a uniform.
in most places in the US paying a disencentivized person $10/hour to "guard" things or places you assign value to, is a dubious proposal. they know how little value you place on guarding and them, they act accordingly.
in most places in the US paying a disencentivized person $10/hour to "guard" things or places you assign value to, is a dubious proposal. they know how little value you place on guarding and them, they act accordingly.
Agreed. And yet it is standard practice in the protective service industry.
Great comments. I used to manage a guard company back in a past life, I ended up jumping on the technology train as soon as I realized how much of a pain it was to keep retraining due to high turnover of staff in that industry. The machines take fewer breaks, don't cut corners, and aren't completely derailed by short shorts and other worldly distractions.
At the end of the day though, guard companies won't go away any time soon, as someone always needs to be on site to work w/ police during an incident, or act as the property owner's representative. Maybe when we have roboguards that don't drown themselves in pools, run over kids, or fall down stairs, that will be less of an issue. Who knows...but we can always keep our eye on the horizon and plan for the future.
What is your sense about the likelihood of tech vs guard resources shifting in the next decade? For sure, guards will be needed but what about reducing their count. Say Ala Moana, I don't know how many guards they have now but do you think it's realistic that they will reduce guard count as technology evolves?
Hey John, I'll use the electric company as a use case for your example. When I started there in 2008, we had 102 guards on staff, covering 152 facilities, many of them unstaffed other than the occasional roving patrol.
$25M and 10 years later, the guard count dropped to 36, response time was cut by 2/3, and all critical facilities were being monitored by their SOC on all islands in real time. At those numbers, the system pays for itself by around 2026. Not a bad return on that one.
For Ala Moana, similar things can be done, but guards still need to roam the parking lot as a deterrence. I was their security director for parking/external areas for a few years and they have a very significant vehicle theft/burglary problem. The environment makes it less likely to be solved through technology, but tech should be used as a force multiplier everywhere its practical.
Hey John, growth for Allied, especially in Hawaii, is unlikely in the next year or two. They've just taken on all of G4S's contracts. Even if every single G4S guard transferred to Allied, they'd still have a significant deficit in terms of hours contracted vs available staff. This is exacerbated by the guard training requirements they face, they can't just hire a person and put them to work the next day.
The silver lining for integrators in Hawaii in particular, is it will likely be a couple of years before they pull it together enough to leverage any technical resources needed to pull off any integration/ESS projects.
I haven't seen any guard companies successfully compete in actual integration work in Hawaii anyway though, all I've seen is a few questionable Securitas attempts that I'm sure I'll have to fix later anyway. I'm sure that's rude, but meh.
I definitely see where technology can replace a guard. Doing an alarm verification using a camera is more efficient and safer than sending a person to check things out. Using automation such as access control to eliminate repetitive tasks is a huge cost savings.
This automation creates another issue though, you have replaced a guy who makes $14.00 an hour as a security guard, because all of the quick and easy screening/verification is done by a machine.
But now come the tough decisions. What do you do with that person who you detected not wearing a mask? Who knows what to do if a situation arises that is outside the playbook? You might need a better quality person making those calls, with a higher pay and authority level.
I see the technology field taking away low level tasks, providing very useful analytics, but the guards required will be of a higher caliber and better trained. You can use technology to detect all kinds of stuff, but somebody eventually has to deal with it.
I see more technology, fewer but better trained guards in the future.
We see really big opportunities for really big security guard companies, like Allied Universal.
Hundreds of municipalities are downsizing their police departments due to revenue reduction, and other reasons. But citizens will demand “security”. A quick solution for the big, complicated transition will be “privatization” via Allied Universal.
Good question… Each Muni would contract with private security firm to deliver “services”. Costs are included in citizen taxes, same as before. Simple substitution of services, reporting to, and coordinated by the Police Chief. It is informally known as “privatization”.
Great question. I do think that with privatization, we would see a significant decrease in cost per guard versus cost per officer. The question is what that entails for the safety and security of those citizens. Great that I can get 3 guards for the price of one officer, but if they are not as effective as a single officer, what good is it?
As a footnote, municipalities in Los Angeles currently contract with the Los Angeles County Sheriffs Department for law enforcement instead of having their own police force.
The powers to arrest differ from Private Security to a sworn Deputy, so some things will have to be addressed.
Alarm calls, accident calls and time taking tasks with lower risk could see Private Security contracted to supplement the sworn officers.
This could reduce some of the pension debt issues smaller municipalities are facing in the future.
I first saw G4S in Cameroon eight years ago where they had the contract to guard the residences of U.S. embassy staff.
I've since seen them all over the world, most recently in Latin America where they do integrations in Brazil and Argentina (in addition to guard services, including at embassies and consulates).
Will be interesting to see if the merger creates opportunities for Securitas or Prosegur to improve their customer service and claw away G4S customers or if a U.S.-based Allied Universal/G4S runs into complications in certain markets (e.g. PRC).
In addition to “Privatization”, another opportunity in the US for profitable growth could include “Private911”.
For many decades, millions of existing deterrent alarm customers, monitored by firms like Monitronics, Vivint, RapidResponse, ADT, Lydia/COPS, (and peers), expect on-demand site-response when their alarm system sends unknown signals. Now known as UPR/Unnecessary Police Response/ false alarms, consuming up to18% of local police resources. Consequently the trend is for slow of no site-response, all across the country. To avoid excessive attrition, and lose a big piece of the market, private site-response can be a valuable service. G4S has lots of experience in other parts of the globe where private response is the norm. Maybe a good companion service to privatization, with shared management.
Unless technology and AI will develop to the point that it may replace human guards interacting with 'bad actors,' the guard market will either stay the same or grow. We do not have 'robocops' yet.
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Comments (22)
Michael Cain
It is interesting to see the convergence in the security guard industry. I currently have security guards working in my facilities, provided by a third party company.
My thoughts on this merger from an end user perspective are mixed. Bigger does not mean better when it comes to uniform security guard companies. I have found that customer service can suffer, especially if you don't employ that many guards.
These firms often try and sell you some sort of security technology technology at the same time that they want to supply boots on the ground. I use technology to replace people where I can, which is a huge cost saver in the long run. Over the length of a security contract, a security company might make more money from guard services than from a technology solution, unless they can build in an ongoing subscription service for "value added" options.
In those places where I do need a person, I need someone with a skillset in dealing with the public and in making good decisions. In today's environment, that means insisting that a guard gets paid a decent wage. My guard contract stipulates the rate paid to the guard, so that the security company could not short change anyone. This means that I get a better quality individual representing the security function, and have a very low turnover rate.
I have been in a situation where I fired a guard company, but had the new company hire all of the existing guards, as they were a good team, but the company customer service was terrible.
When I look at the security technology side, I find that my local integrators provide me the best options. They offer various solutions, various technology platforms, and don't have an agenda other than doing good work so that they get more work later.
I recently ran a competition for some camera work, and the big security firms came in considerably higher on price than the local security companies that I'm familiar with.
Maybe on some Macro scale, having a couple of huge firms generates some internal efficiencies for them that makes them more profitable. From my micro level, I don't see them a leaders on the technology side, but as companies that try to sell proprietary equipment/processes. I don't feel that they offer me anything I can't get better and cheaper somewhere else.
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Lee Jones
12/11/20 06:27pm
“Privatization” is the key word.
We see really big opportunities for really big security guard companies, like Allied Universal.
Hundreds of municipalities are downsizing their police departments due to revenue reduction, and other reasons. But citizens will demand “security”. A quick solution for the big, complicated transition will be “privatization” via Allied Universal.
Source: Lee Jones; Support Services Group
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Robert Wren Gordon
I first saw G4S in Cameroon eight years ago where they had the contract to guard the residences of U.S. embassy staff.
I've since seen them all over the world, most recently in Latin America where they do integrations in Brazil and Argentina (in addition to guard services, including at embassies and consulates).
Will be interesting to see if the merger creates opportunities for Securitas or Prosegur to improve their customer service and claw away G4S customers or if a U.S.-based Allied Universal/G4S runs into complications in certain markets (e.g. PRC).
Create New Topic
Lee Jones
12/12/20 07:41am
In addition to “Privatization”, another opportunity in the US for profitable growth could include “Private911”.
For many decades, millions of existing deterrent alarm customers, monitored by firms like Monitronics, Vivint, RapidResponse, ADT, Lydia/COPS, (and peers), expect on-demand site-response when their alarm system sends unknown signals. Now known as UPR/Unnecessary Police Response/ false alarms, consuming up to18% of local police resources. Consequently the trend is for slow of no site-response, all across the country. To avoid excessive attrition, and lose a big piece of the market, private site-response can be a valuable service. G4S has lots of experience in other parts of the globe where private response is the norm. Maybe a good companion service to privatization, with shared management.
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Undisclosed #4
The only benefit will be for global customers in contracts. This will likely lead to poor service overall.
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Jonathan Pine
Unless technology and AI will develop to the point that it may replace human guards interacting with 'bad actors,' the guard market will either stay the same or grow. We do not have 'robocops' yet.
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John Honovich
Update: G4S has announced - Offer from Allied Universal Unconditional as to Acceptances | G4S Global
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