It’s finally official. The long awaited megadeal in the private security industry has been approved. On April 5, Allied Universal announced its acquisition of G4S.
As the industry continues to consolidate around a few superpowers, many security guard companies are likely wondering what this will mean for them. Let’s take a look at 6 key takeaways to this historic deal.
(NOTE: These takeaways are largely pulled from Robert Perry’s vast knowledge of the security industry. Check out his article on the AUS/G4S transaction for more information and insight.)
1. There's a New Global Superpower
Allied Universal almost exclusively operates in the United States security services market - bringing in over 98% of its $8.4 billion revenue in 2019 domestically. G4S, on the other hand, made roughly 70% of its $9.9 billion in the international security market.
While Allied Universal is still projected to have a slightly heavier presence in the domestic security market, its international presence will definitely be felt in the months to come.
The acquisition will put Allied Universal’s new annual revenue in the ballpark of $18 billion. This puts Securitas - the current #1 in the industry at $11.7 billion in revenue in 2019 - in a distant second place.
This deal puts Allied in the forefront not only in the private security industry, but in the global business community as a whole. With 800,000 employees, Allied has become the 7th largest employer in the entire world.
2. The Best of Both Worlds
The consolidation of service offerings and costs will likely increase the profit margins of the new Allied Universal.
While Allied has historically focused more on traditional security guard services, it will now be able to easily incorporate the technology-focused security services that G4S has heavily invested in over the years. This could lead to service expansions across all of Allied’s contracts that are currently looking for more tech-enhanced services.
A greatly increased employee headcount, while a logistical challenge, can also reduce cost. Allied Universal will now be able to negotiate better rates on employee benefits, equipment, uniforms, and other sweeping expenses - further expanding profit margins.
G4S has primarily operated in the international security market, but it still has a sizable presence in the United States. Post-acquisition, the overlap in the domestic market between Allied Universal and G4S will likely allow corporate office spaces to be consolidated, driving down overhead costs even more.
The real question becomes: what does this monumental deal mean for the other roughly 8,000 companies in the U.S. private security industry?
3. Opportunities to Bid New Security Contracts
Security companies merge all the time. When they do, contract attrition is to be expected. In fact, the industry average is 8-10%. So what does that mean in the case of the Allied Universal deal?
With a new projected revenue of roughly $18 billion, the average attrition rate suggests that there could be anywhere between $1.5 billion to $2 billion in potential contracts hitting the open market in the near future.
This has the potential to open up giant growth opportunities across the entire industry, but especially for small business security companies who can sell themselves as having a more “personal touch.”
BONUS: Check out this free webinar on Managing Transitions Between Security Providers that will help you limit your own contract attrition rates.
4. Increased Competition on Smaller Security Contract Bids
With the increased manpower and resources post-acquisition, Allied Universal/G4S have the ability to target very large contracts (things like government security contracts, assisting or even replacing local police forces).
While Allied Universal focuses on these larger, more intricate security contracts, there could be a window of opportunity for small business security firms to increase revenue through an increased number of small contracts.
Smaller guard companies should also look for opportunities to take on any additional contracts Allied Universal might be looking to outsource.
5. Security Bill Rates Could Become Even More Competitive
As discussed previously, the new Allied Universal will likely be able to significantly decrease costs across the organization. This could result in lower, ultra-competitive bill rates for security services.
If this is the case, it will be more important than ever for the rest of the industry to remain competitive in every area except bill rates. Smaller guard companies should continue to focus on things like quality of service, accountability, and transparency to continue winning security contracts without being the lowest bid.
6. Technology-Focused Security Services Will Be of Critical Importance
The manned guarding industry has been moving towards a larger and larger technology focus for a long time. This acquisition makes security guard technology even more important.
For mid-sized and enterprise security companies that have the capital, incorporating technology wherever possible will be all but a necessity - especially in areas like access control, risk assessment, and visitor management.
For small business security firms, any technology you can include as part of your service offering will help. At the very least, you should look at adding guard management software to your operation.
If you are a smaller operation with limited capital, don’t try to take on the moon. Trying to play keep up with a powerhouse in technology-based security services will likely only hurt you in the long run.
The private security industry continues to become more and more competitive. Although the groundbreaking Allied Universal/G4S deal will present new challenges to the other players in the industry, it will likely bring new opportunities as well.
For more information on the manned guarding industry more broadly, here are a few resources: