By Niclas Rolander
Sweden's Securitas AB /zigman2/quotes/203151739/delayed SE:SECU.B +0.05% , the world's second-largest security-services company by revenue and number of employees, has an M&A department working flat out.
With a war chest of $300 million to $470 million, the company's chief executive, Alf Goransson , has his sights set on a major acquisition in the U.S. government security sector, and on stepping up the rate of expansion in Latin America.
Mr. Goransson, who has been with Securitas since 2007, says he enjoys the "infinite challenges" of being at the helm of a company with 280,000 employees.
Both Securitas and its distant cousin G4S PLC, the global security industry's number one in terms of revenue and number of employees, trace their roots to a small night-watch business started in the early 20th century in Copenhagen.
In 1934, the company expanded to Sweden, where it took on the name Securitas. When it was split between the founder's heirs, the Swedish operation retained that name, while the rest of the company would become G4S.
Last year, Securitas bought 15 companies with a total of 19,500 employees for around $200 million. Most of the acquisitions were small, but one of the larger deals was the $33 million acquisition of Paragon Systems in the U.S. Paragon has a contract with the Department of Homeland Security to provide security for federal government facilities.
Mr. Goransson, 53, recently discussed his plans. Excerpts:
WSJ: Do you see Securitas as representing a particularly Scandinavian brand of security operations?
Mr. Goransson: Yes, our business model is still based on the way it was established in Sweden. Guards in Sweden have a decent status. You get a good education, reasonable working conditions and a wage you can live on, which isn't always the case in other parts of the world. Basically, that is the Securitas model.
WSJ: How is the international fiscal crisis affecting Securitas?
Mr. Goransson: It is negative, but the effect is limited, for two reasons. First, only 15% of our sales are to the public sector, and the second cushion is that a number of government authorities will be forced to look for new solutions. There will be just as many crooks, and crime will probably be unchanged, so governments will be forced to solve security issues in other ways. As the cost of a guard is half that of a police officer, private security firms will get an opportunity to grow and take a larger part in crime prevention.
WSJ: Do you want to expand further in the U.S. government security sector?
Mr. Goransson: Yes, definitely. We bought Paragon as a first platform for growth in the U.S. government security business, and at the moment we are working on another acquisition in that sector, which will be merged with Paragon if the deal goes through. If we close the deal it will be this year, but you never know until the ink is dry.
WSJ: How will the U.S. budget deficit affect your plans for expansion there?
Mr. Goransson: We haven't yet seen any cuts in security in the U.S., and the country hasn't attacked the deficit in the aggressive way the U.K. has. So far what we have seen is just a little bit more caution, and the cuts being made mostly at the individual state [rather than federal] level. Security is still a priority in the U.S., and while private businesses were forced to make cuts in security costs during the crisis, I don't see a dramatic decline in demand from the public sector. There are buildings, offices and facilities that have to be protected. You can't compromise on protecting a nuclear power plant, for example.
WSJ: Are there more deals in the U.S. government security sector in the pipeline?