With one transaction, Andrews International Inc. has become the largest privately held security guard company in the country.
Earlier this month, the little-known Valencia firm announced it acquired the U.S and Mexican operations of Garda World Security Corp., based in Montreal. Andrews financed the deal with backing from Audax Group, a Boston investment firm that has a majority stake in Andrews.
The acquisition will give Andrews International, which had about 7,500 employees, a total of 10,500 employees, about 85 percent of whom are uniformed guards.
The Garda operations generated $128 million in sales and $4.5 million in operating profits in the 2009 fiscal year, according to the Canadian company.
Andrews International’s clients include several Hollywood studios, more than 100 malls around the country and large commercial real estate companies, including W & H; Properties, the owner of the Empire State Building in New York.
In addition to the higher guard count, the acquisition gives Andrews International a larger presence in two lucrative markets: government facilities and Mexico.
The spike of drug-related violence in Mexico has caught businesses in the crossfire. Executives are a favorite target for kidnappers and the end of the workday at south of the border facilities provides an opportunity for shootings and abductions.
“A lot of our clients are trying to find answers to Mexico. This purchase immediately gives us a sophisticated headquarters in Mexico City with 24-hour monitoring systems, GPS tracking and an executive protection operation,” said Andrews International Chairman and Chief Executive Randy Andrews, a former Los Angeles Police Department Special Weapons and Tactics officer who founded the company in 1988.
Andrews also sees growth potential in protecting government facilities in the U.S., with even local governments putting a larger emphasis on security. County offices and even libraries are now seen as possible terrorist targets and require protection.
“We feel strongly that we can go after government contracts, and this acquisition grows our market presence in that sector quite a bit,” he said.
Small player
Andrews founded the company while working as a part-time security guard at Sunset Gower Studios in Hollywood to augment his salary. During the taping of the TV shows “Who’s the Boss?” and “Married With Children,” the studio repeatedly changed security guard companies.
Andrews grew tired of signing up with different companies to keep the same job. So he asked to take over the contract and created a company for the task.
After Sunset Gower, the company landed a contract with Sony Pictures Entertainment, then later with Home Box Office and other companies, including Walt Disney Co. and its theme parks.
From a solid base in entertainment, Andrews expanded to malls; the first contract was with the Northridge Fashion Center Mall. Today, Andrews patrols malls owned by Caruso Affiliated, including the Grove in Los Angeles, as well as those owned by General Growth Properties, such as the Glendale Galleria.
However, even with more than 10,000 employees, Andrews International remains a fraction of the size of large, publicly traded multinational giants of the security industry.
Securitas, based in Sweden, has 240,000 employees worldwide, while British firm G4S has nearly 600,000. Garda, one of the smaller publicly traded companies, still has more than 40,000.
“A large consolidation in our industry has put 60 percent of the business in the hands of two companies,” Andrews said. “G4S bought Wackenhut, and Securitas has Pinkerton and Burns. We can compete because a lot of companies are looking for high-quality service, not a commodity.”
Robert Gardner, an independent security consultant in Camarillo, said the main advantage that large security firms have over smaller ones is the ability to spread the costs of workers’ compensation, uniforms, training and legal fees for fighting lawsuits.
The larger firms also are able to take on some of the deadliest assignments.
Garda said in a statement that it is divesting the operations it sold to Andrews so it could focus on its “growing Global Risk Consulting Group,” which provides security in Iraq, Afghanistan and other dangerous countries where Andrews International does not have personnel.
Gardner said companies such as Andrews International have succeeded by finding a profitable niche in the middle market between the large companies and the small mom-and-pop outfits that still survive.
“There are small guard companies that command exorbitant rates because they supply a specialty service that the commodity guard company can’t supply,” he said.
To separate itself from the competition, Andrews International has developed expertise in the convergence of technology and old-fashioned guard patrols. Video cameras, sensors and similar technology is often resisted by security companies because they result in fewer guard hours and lower revenues, Andrews said.
Andrews International focuses on training its guards to use the technology and charges a premium for its services, though the company declined to release its rates.
Andrews added that he sees the Garda acquisition as opening the door to international expansion. He is looking to acquire more security firms in Latin America and the Middle East.
“This is the opportune time to enhance our operations and footprint,” he said. “We will continue to make strategic acquisitions to increase our footprint in specific markets.”
