Case Study: Central Security Group

Explore this investment 11.17.15

Fast Facts

  • Knowledge of Industry
  • Sourced Financings

One day in the early 2000s, a connection from Great Hill Partners’ extended deal sourcing network called with contact information for Mark Wilson, CEO of Central Security, a rapidly growing five-year-old residential security alarm company based in Tulsa, OK. Central Security’s growth had exceeded the financial resources of the company’s bank and equity sponsor, an obstacle Mark wanted to remedy.

The most challenging aspect of the deal was balancing the existing sponsor’s high-price expectations while leaving the company with the financial flexibility to continue growing. Fortunately, we had both the industry expertise to understand the opportunity and the financial connections to arrange appropriate financing.

Mark commented on the deal, “I was frustrated by my original sponsor’s lack of capital, and further frustrated that he wanted a very high price and a rapid closing. Frankly, I didn’t think GHP could pull it off.”

We had recently reviewed six other security monitoring transactions and passed on them all. Central Security, however, was a cut above the others with the growth prospects and disciplined operations of a market leader. We mounted a rapid due diligence effort and mobilized our banking relationships to provide a $100 million facility which paid off the sponsor and allowed the company ample room to grow.

Mark said, “GHP knew exactly what that they were doing. They asked the right questions, focused on the key metrics and closed on the day and for the price demanded by my former sponsor. I didn’t even know you could put this type of facility in place for a company of our size.

As the time approached to sell the business, we recognized that an anticipated wave of security alarm industry transactions and consolidation could obscure the strength of Central Security’s business model and financial performance. GHP contacted Barnes Associates, the security alarm industry’s foremost strategic advisory, to make sure Central Security was properly profiled within the industry. GHP also authored an innovative measurement analysis highlighting the company’s market-leading return on assets versus its competitors.

Commenting on his experience, Mark said, “All involved were well pleased when Central Security was sold five years after GHP’s initial investment.”

Central Security was acquired by Summit Partners after growing revenue and EBITDA at a compound growth rate of over 20%.