As you can check out on the SSN website, GHS Interactive Security recently protected a $50 million credit facility.
Michael Barnes, creator of Barnes Associates Inc., the consulting and advisory company that specializes in the security alarm industry, offered SSN with intriguing understandings about the non-traditional offer, keeping in mind that GHS had recently reached a milestone $500,000 in RMR.
Right here’s what he told SSN:
“GHS is a really intriguing company. Steve Baker and Topspin Partners were trying to find a chance in the market and suched as the concept of purchasing a sales and setup engine and developing a full-service company around that, instead of purchasing an existing incorporated alarm business. We [Barnes Associates] had actually sold an ADT dealership the year before and understood there was genuine value in business that have the account origination ability … but no RMR.
“This is not the typical path by which private equity buys the industry. Normally, they look forlook for totally operating business that have a material customer base and RMR that can be leveraged, The first day. At market pricesmarket value for these business, however, the majority of investors cannot get the returns they are looking for without significant growth after the initial acquisition.
“Steve Baker and Topspin Partners acknowledged that buying a highly capable originating company, and then building up the operations around this capability and the RMR they might generate paid for the possibility to grow a large effective company utilizing a better cost dynamic. Instead of buying a completely functioning, incorporated alarm business then taking the danger connected with establishing added growth ability at a low expense, they purchased the growth engine and took the threat that they might build a working full-service company around it.
“Basically, this is following the course Vivint took, where they initially established a material account origination ability and after that began to keep the accounts and developdevelop the essential infrastructure to possess and service them.
“Steve Baker knew the best business to get– LifeLine Security. The business was establishedwased established and owned by Gordon Johnson and John Fox, who had actually perfected the year-round door-to-door sales design (instead of the “summer season sales” model), in a number of California markets. They were generating nearly $200,000 a year of new RMR under a dealer program and were searching for a method to alter their design to one that would build a completely integrated business.
“Gordon and John also had experience earlier in their careers in other parts of the Southwest, and had the tested capability to broaden into new markets. This harmonized with Steve Baker’s vision to widen geographically into Texas, Arizona and Nevada in order to have a more diversified footprint and a larger general market opportunity.”
“Starting with no accounts in mid-2013, when GHS got LifeLine, they have grown to over $500,000 of RMR.
“This rapid growth needs capital, and we have actually enjoyed dealing with the GHS team to develop the finestthe very best method to satisfying this requirement. We recognized Topspin Partners as the best fit for the equity, offered their highly effective prior play in the industry and their appreciation for the opportunity. The debt part of the capital structure was an obstacle, however, as the business required a lender that might begin small, Day One, and grow quicklyproliferate with the company. Most of the loan providers that genuinely comprehend the industry vibrant typically require the full maintenance infrastructure to be in location and shown, and a seasoned existing account base. Neither of these were present with GHS. Furthermore, most of the industry loan providers had minimum preliminary borrowing amounts well above GHS’s initial need. We discovered a department of Barclays that supplied the preliminary center.
“Fortunately, Brent Humphries and Patrick Fear had left Barclays and relocated to Alliance Bernstein to head up a really biga huge non-bank financial obligation fund, AB Private Credit Investors. Brent and Patrick were instrumentalcontributed in establishing the preliminary facility and were intimately familiar with the business. We performed a relatively broad placement process, and they quickly identified themselves by proposing a highly versatile package of debt capital that satisfied every one of GHS’s needs, together with extremely competitive pricing and an ability to cycle through the approval and closing procedure rapidly. Because they are not a bank, they brought an intrinsic versatility that was attractive. They are truly a capital partner, rather than a “loan provider” in the traditional sense.
“AB was fantastic to deal with. Not only are they ideal for GHS, however I know they have the hunger to do more in the market.”