Hard targets

An acquisition is an important event in a company’s history, but for G4S it’s just business as usual. Mark Dunne reports

An acquisition is an important event in a company’s history, but for G4S it’s just business as usual. Mark Dunne reports

In Trevor Dighton’s line of work a head for figures is crucial. However, if you ask the chief financial officer of security specialist G4S Plc how many acquisitions the group has made in the past few years he struggles to give a definitive answer. But Dighton’s shareholders shouldn’t worry, he hasn’t lost control of the business.

When the Crawley-based group bought US electronic security systems specialist Touchcom in June for £28.5 million, he claims that it brought the number of acquisitions it has made to 74, but would prefer it to be reported as between 80 and 90.

Dighton is not trying to embellish the truth, he is just making a point that the group is looking at so many acquisitions around the world that by the time this article is published this figure will be outdated.

Touchcom is the latest in about a dozen acquisitions made by the group this year. It has so far spent some £550 million in 2008 on businesses in the UK, the US, Greece, Macau and in the Baltic States, which include the £355 million takeover of GSL and buying ArmorGroup for £43.6 million.

“Behind this trend for acquisitions is the need to get more specialisation and expertise into the organisation and broaden the range of what we do,” Dighton says.

Come together

G4S was created in 2004 following the merger of Group 4 Falck and Securicor Plc. The enlarged group, which is listed in London and Copenhagen, provided manned guarding and cash services with some aviation and government outsourcing interest, but not enough to differentiate itself from its competitors.

The board decided to embark on a series of acquisitions to expand the business. “Our acquisitions have to bring some extra capability with them as well as extending where we are in the world or in a particular market,” Dighton says.

By the end of 2007, G4S had completed almost 70 acquisitions, worth some £350 million. This strategy has added to the group businesses that arrange security for the Wimbledon Tennis Championships and party political conferences, fire protection and emergency response operations for the Kennedy Space Centre, and protection for parliament and NATO buildings.

Today the group has operations in more than 110 countries across six continents and some 530,000 employees. By the end of 2007, the strategy had built a business with a £4.5 billion turnover, a rise of 14.5 per cent on the previous year’s figure of £3.9 billion. In the same period, its pre-tax profit leapt from £109.9 million to £160.6 million.

Man with a plan

Following the merger, the board promoted Graham Foster to director of corporate finance and planning, to spearhead the new strategy. But he admits that his role is not to drive acquisitions – they are identified and managed at a local level by the group’s regional businesses.

“Who are we to determine what the best fit is for them in their own markets?” he adds. “Our local businesses have their own people, their own relationships and will be promoting their own ideas.”

However, he does play a role when more complex deals are proposed. “We try to only get involved when we have to and where there is a pressing need to. It is about working with the local people to make sure that they evaluate these opportunities correctly.”

G4S’s acquisitions are funded by a £1 billion debt agreement arranged by a syndicate of 14 banks. Dighton says that arranging the debt wasn’t difficult, as the group is fairly cash generative. “But of course our organic growth, which is 11 per cent in the first quarter of this year, and the acquisitions we make increase our leveraging ability to raise additional debt.”

In May, the group raised some £282 million by placing up to 127 million new ordinary shares at 222p each, in part to reduce its debt. “We did a small equity issue just to give us plenty of firepower because there is such a large amount of activity going on for us at the moment,” Dighton says.

To be continued

Dighton is pleased with the progress made so far, but says there is more to do. “The push towards organic growth and acquisitions to broaden the group’s capabilities is going extremely well, but we are not complacent. There are always things that can be done better and more that we can do.”

By “more” he means expanding its consultancy expertise. “The first move a company makes when it wants to re-evaluate its security is go to a consultant. We want that to be us, so that we manage all that customer’s security requirements.”

On the geographical side, the group is well established around the world. “We don’t do things for the sake of putting a flag in a map, but there are some gaps that we are looking at. We are in every South American country with the exception of Brazil. We have had a few false starts, but we are still looking at businesses there.”

He sees China as a huge market. “We have three businesses in China, but the regulatory environment doesn’t allow us to operate extensively. Maybe not this year, or the next, or the year after that, but there will be a lot more activity for us in China when the regulatory environment opens up.”

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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