The Art of the Deal – Security Style
Mergers and acquisitions (M&As) in the physical security space have hit record-smashing rates in the last several years. But perhaps no other company has made so many back-to-back acquisitions as Pye-Barker. Founded by John Pye and Ben Barker in 1946, they are a national leader in fire protection, life safety, and security services. They have welcomed more than 100 additional fire protection, sprinkler, and security companies in recent years. It’s been an acquisition a-go-go, and they’ve apparently mastered the art of the deal.
In a recent Security Nation podcast, Eric Garner, president of Pye-Barker’s Alarm division, shed light on the company’s aggressive acquisition strategies. Garner, who sold his Mountain Alarm business to Pye Barker in December 2021, points out that the company acquires in three different segments. Thes are fire extinguisher companies, fire sprinkler companies which are a bit more service-oriented than fire extinguisher companies, and alarm companies. Although Pye-Barker has made a whopping 23 acquisitions in 2023 alone. Garner contends that of all the companies they’ve considered buying, they’ve only settled on roughly one out of every four.
“Largely, we’re looking for companies that have our same culture, which is very customer focused, team member focused, and family focused,” he says. “We’re as big as any of the top 10 integrators or alarm companies in the nation and we have the resources of the top 10, but we really operate as what I like to call the largest family business in the country. Basically, Pye-Barker is made up of fast approaching 200 individual companies. They have come together to be the best-in-class life safety providers around the country.”
He adds that most of the management teams from companies Pye-Barker acquires stay on in some capacity. They help drive the vision and continue to grow the business and expand the offerings. “For us, it’s not just the alarm space. We really like fire extinguisher and fire sprinkler inspection and service. So, we’ve helped a lot of these companies who’ve joined up to add those services and offer them to their customers. We look for people who are openminded and want to grow the business and offer more to their customers.”
As Garner explains, when Pye-Barker buys a company, they’re looking for the best service provider in that market. They’re looking to bring on every one of those team members and then grow the team because the goal is to add more offerings. Their approach is not to buy a company then cut costs and save a bunch of money. It’s to buy it and then continue to invest in that company and its people, as well as to recruit additional talent and get additional licensing, and whatever else that local operation needs.
Pye-Barker also drives synergies across all their ever-expanding number of companies. They do this by bringing, as Garner terms it, everyone into the same technology stack on the same email server. As well as the same phone systems, the same accounting and quoting software, etc. On the local operational level, the owners and operators continue to oversee customer service and business growth. They are ultimately responsible for the profit and loss statements and the balance sheet of their business.
“A lot of the other acquisitive companies are just buying companies then leaving them completely standalone. Meaning IT Services, accounting – all that happens at a local level. Whereas we’re doing it at a centralized level” Garner points out.
“This allows the entrepreneurs to do the stuff they really love. Which includes growing the business and taking care of their customers and their team. We found that unique aspect of our approach to be a key to our success.
“Two of our recent acquisitions included AMSconnect, which is probably the largest integrator in Palm Desert, California. As well as Maximum Security, which we purchased the following week and is probably one of the largest security providers in Palm Springs. So those two companies coming together will help us be a real powerhouse. And to provide better service and additional offerings to that customer base in Palm Desert / Palm Springs,” he notes. “And this is not the first time this has happened. We’ve had multiple instances where we’ve found three companies in one city.”
Garner reports that throughout all the acquisitions, there have been countless times when people have said they really feel at peace with their decision to sell to Pye- Barker. They knew it was a really good home for their team and felt safe and secure. “There’s no negative reputation out there,” he adds.
“We’ve got so many companies; the team members are happy, and the past owners are happy. Including those that have stayed on and those that have retired. The reputation is really unique and that’s a huge part of our value proposition. These people who are selling their business want to sell it to someone they trust. Someone who’s going to do what they say they’re going to do, who’s going to take care of their people and take care of their customers. But ultimately, it’s a gut feeling when you make that kind of decision. You’d be amazed how many people have joined our platform just based on that gut feeling.”
What uniquely positions Pye-Barker, he says, is that we have great partners and investors that really believe in what we’re doing.
“There are a lot of copycats out there trying to do what we’re doing, but we are blessed because our investors have extremely deep pockets. Currently, all the companies we’ve been buying, we’re buying with cash. It’s all equity; we’re not borrowing to buy these companies. We had a large injection of funds. So, I believe the M&A activity you’re seeing with Pye-Barker will continue in a big way for the foreseeable future – for sure through 2024.”
The market in general for M&A has slowed since the highs of 2021, 2022 because of the interest rates. A lot of the competition is borrowing money to do these acquisitions. The cost of capital has gone from 3, 4, 5% percent to 10, 11, and 12%. So, these deals have a hard time getting a return on investment that’s satisfying the owner/operators or the investors.
“We’re in a very strong cash position on our balance sheet and as we continue to grow. These companies continue to spin off cash, so it’s also very healthy and secure,” Garner explains. “I think that means a lot to people who are trusting us with their legacy. Which could be anywhere from 20 to 45 years that they’ve been growing their family business. Now they’re trusting that we’ll move that legacy along and continue to expand their offerings and take care of their team and their customers.”
Today, Pye-Barker is operating in approximately 200 locations in 40 of the 50 states. Although they have not gone international yet, the goal is to continue to expand across all the states. Then in 2024 start to look internationally for opportunities as well. But for now, they believe there’s a ton of opportunity right here in the USA.
“I don’t have an example of an acquisition gone wrong. We’ve been truly blessed and really lucky,” Garner says.
“A lot of times people think these big companies only make acquisition decisions based on the financial numbers. Although, we also make ultimate decisions based on our gut, as well. And that’s where the trust comes in between my team and our CEO, Bart Proctor, who is an amazing leader and a great support to what we’re doing, along with our financial partners. The trust is so key to the speed at which we’re growing this business and creating what I hope to be the greatest life safety company in the world.”