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Acquisitions and Mergers in the Manned Guarding Industry

October 10, 2011

The transfer window closed for Premier League Football Clubs at 11 p.m on the 31st August and by then a sum of well over 400 million pounds had changed hands between top flight clubs throughout the world in the few months between the end of last season and the end of August 2011. Many of us still look in horror at the amounts being paid for top class players and the weekly salaries which they allegedly earn. Notwithstanding that, our greatest criticism is reserved for the players’ agents who seem to pick up vast sums of money for what appears to be very little input; of course that is not totally true because the agent has the task of parading his or her charge in front of a number of prospective and eager buyers in order to get the best price for both the player and themselves. The introduction of oligarchs from Russia and the Middle East means that top flight football is currently awash with money – that is until the bubble eventually bursts!

The contract manned guarding industry is in a wholly different situation. The margins are now so low in manned guarding that some owners are desperate to offload their companies – at almost any price – whilst conversely other companies realise that in order to survive and stay in business they have to try to buy such companies as cheaply as possible. Apart, therefore, from the Industry leaders, who may possibly be in a position to pay a fair price at the time, the rest of us are either just struggling to stay afloat or trying to get the best possible price for the fruits of our labour.

Unfortunately, and again lingering in the background, is the “agent“ who in fairness has probably been responsible for introducing the buyer and the seller and who may or may not be responsible for some role in the financial due diligence of the ultimate transaction. We don’t have a problem with agents, but we certainly do over the level of their charges. The last acquisition in which I was personally involved in an operational due diligence role on the selling company, engaged an agent who was charging the buyer no less than 4% of the total purchase price of the selling company! The acquisition price of the vendor company was c. £1 million and the agent’s fee was therefore £40,000 and – really – for what? The vast majority of this money could so easily have gone to the seller and no doubt in some way made his or her exit from the Industry more palatable.

There are by common consent approximately 2,000 contract manned guarding companies operating legally throughout the United Kingdom; of this total some 730 have voluntarily joined up to the SIA’s Approved Contractor Scheme (ACS). Undoubtedly one of the future requirements of any revamped SIA will be to organise the formal registration of every one of those 2,000 companies. We remain convinced that many good companies have so far decided to remain outside the ACS so avoiding the high cost of such membership. Notwithstanding that, many contract manned guarding companies currently either inside or outside the ACS will either acquire, merge or just disappear before registration becomes a legal requirement. We want to help companies who decide to make a move before registration and to do this by keeping the so-called “agent’s fee” to an absolute minimum.

As a result we are setting up a website which allows any companies in the contract manned guarding industry, whether or not they have voluntarily submitted to annual inspection under the ACS, to join the initiative. This is how it will work.

1. The Registration. Any contract manned guarding company wishing to be circulated with details of other companies which themselves either want to buy or sell in the market, needs to register with the scheme. They will then be issued with a coded registration number which, as highly confidential information, will only ever be known to the applicant company and ourselves. The annual cost of registration is £75 +VAT.

2. The Introduction. As stated, every company which has registered will be given a coded number, which will vary dependent on whether or not they are a national or local company. For example, when a buyer contacts us to try to acquire a local company in one of the 11 designated regions in the UK, we will confirm with the seller that they are happy to enter into an exclusive confidentiality agreement for a maximum period of 3 months (this can of course be ultimately varied by mutual consent). Only at this time, and with the approval of both parties, is the introduction put into effect. Our cost to the buyer for the introduction is £200 +VAT.

3. The Sale. If, and only if, as a result of the introduction a sale takes place between the buyer and the seller, a final fee of £1000 +VAT is payable to us by the buyer.

The real effect of this initiative is to eliminate the need for the huge costs currently incurred by using agents – as we know them – becoming involved in the transaction. As an organisation we are able to offer the services of both financial due diligence and independent operational due diligence, should you want to take advantage of them. Alternatively, you are perfectly free to make your own arrangements in these areas if you wish. The first step is then to decide whether or not you really want either to buy a company or to sell your own. If you do, then you should register with us without delay and from then on we will continually trawl the market to meet your needs. For obvious reasons – although one never knows for how long – there always seem to be many more buyers than sellers in the market. The changes to regulation through the SIA in the years ahead may of course alter all that. It will be interesting to wind the clock forward to 2015 and see just how many contract companies are still operating in the Industry. I suspect it will be very considerably fewer than the 2,000 currently estimated. ALL INFORMATION WILL BE TREATED IN THE STRICTEST CONFIDENCE In order to register your company with the “ACQUISITIONS AND MERGERS DATABASE” please contact Lynda Moore by e-mail on [email protected] or by phone on 01844 260350. It should be emphasised that this service is exclusive to the Managing Directors, or Board Members specifically nominated by them in writing, of the companies wishing to either buy a company or sell their own.

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The ACS Pacesetters is an independent initiative linked to FM Contract Watch LLP and is not being sponsored by The SIA

If you're interested in any of our services contact us on 01844 260 350