Feral Jundi

Tuesday, January 19, 2010

Industry Talk: Good Year For Private Security, By Jody Ray Bennett

Filed under: Industry Talk — Tags: , , , , — Matt @ 6:26 AM

   Excellent little review about the state of affairs for the private security industry last year.  What I found interesting, was the details about all the acquisitions. I think of the quote about buying stocks–‘blood in the streets’, when I hear about Securitas gobbling up companies that are for sale during this recession.  It’s smart, and they will probably do very well as soon as the global recession starts to turn. –Matt

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Good Year for Private Security

19 Jan 2010

By Jody Ray Bennett for ISN Security Watch

While last year closed with new security threats, 2010 looks better than ever for giant, private security companies, Jody Ray Bennett writes for ISN Security Watch.

The world’s largest defense contractor, Lockheed Martin, received an early Christmas present last year when it was awarded an $841.9 million contract to supply 24 F-16 fighter jets to the Kingdom of Morocco. According to reports, Morocco is paying $35 million per aircraft, “which includes advanced countermeasures, electronic warfare and support equipment.”

The defense industry feared losses after the Obama administration cut costly, technologically risky and often developmentally delayed defense programs that were manufactured by Lockheed and its subcontractors. However, market analysts predict that this new contract will “boost […] the company, which had shrunk to $76.4 billion [in] fiscal 2009 from $80.9 billion at year-end fiscal 2008.”

But while Morocco has been searching to strengthen its military forces, the North African country is having difficulty attracting foreign investment, primarily from neighboring Gulf states, due to “poor infrastructure, lack of proper legal framework and excessive red tape.” As intra-national security is a deep concern for potential investors, the monarchy has been looking to strengthen security in its largest cities in order to attract foreign capital.

Swedish-based Securitas, one of the world’s largest private security companies, has swiftly moved into Morocco to become its largest provider of private security guards and security-related services. In a press release statement late last November, the company announced that it had purchased “75 percent of the shares in the security services company GMCE Gardiennage in Morocco,” which has 400 employees, mostly in Casablanca and Rabat. The additional 25 percent is set to be acquired in 2013, depending on company performance.

Big fish, little fish

In fact, Securitas spent most of last December buying up smaller security companies all over the world, the lynchpin strategy of the company’s rapid growth since 1999 when it successfully began to acquire some the oldest private detective and investigation agencies in the US.

Throughout December 2009, Securitas acquired Dora Security in the Czech Republic and is now the largest private security provider in the country. The very next day after its Czech acquisition, Securitas acquired Grupo Argos and – literally overnight – became the second largest private security provider in Mexico, which contains a fragmented market of approximately 6,000 registered security companies.

“These recent acquisitions reflect opportunities created by the current economic crisis. Global security providers like Securitas aspire to continual global growth and expansion, and their biggest profit margins are generally in emerging markets. As profits come under pressure in the more mature markets of Europe and North America, a global acquisition strategy becomes even more important,” Professor Rita Abrahamsen and Professor Michael C Williams of the Graduate School of Public and International Affairs at the University of Ottawa, told ISN Security Watch.

One week later, the company became the second largest provider in Serbia after acquiring Gordon DOO, a firm that provides “technical security, monitoring operations and fire prevention.”

By 29 December, Securitas acquired 49 percent of Long Hai Security, the first privately owned security services company in Vietnam, founded by none other than Retired General Phan Van Xoan, the former head of Internal Protection Services for Vietnam’s interior ministry and chief bodyguard for President Ho Chi Minh.

Securitas ended 2009 with its final purchase of Tecniserv in Spain, a firm that monitors third-party connections and alarm systems for customers mostly in Madrid.

Global private security behavior

These recent acquisitions seem to indicate something of a new period of growth since the post-9/11 industry boom that created much of the demand for private security. However, where one may find a similar parallel with the post-9/11 spike, some experts identify such acquisitions as indicative of the economic behavior driving multinational corporations in the private security industry.

“While the private security industry experienced a spike post-9/11, the dynamics driving the expansion of the sector long preceded those events, and the social factors behind this growth go well beyond the issues associated with 9/11,” Abrahamsen and Williams told ISN Security Watch. “The climate of fear and risk following 9/11 has combined with and further intensified already existing pressures towards security privatization, leading to a more security conscious society at all levels.

“For global security companies like Securitas, a regulated environment is generally preferable and advantageous. It allows them to turn standards into a competitive advantage, to access higher margin clients, and thus improve their competitive position. While this does not stop companies from moving into unregulated environments, profit in one market needs to be balanced against risk to global reputation and this again leads towards a preference for regulated markets,” they said.

In North America, arguably the industry’s most lucrative market, many companies are experiencing decreases in sales. Indeed, BusinessDay reported last November that Securitas specifically would remain in recession into 2010. This is part of the reason large companies are trying to buy up smaller firms in developing markets, where purchases are less expensive. These strategic moves are what Williams believes is a result of opportunities created by the current economic crisis.

Indeed, when global recessions begin to yield, Securitas will find itself at an immense advantage with newly controlled or accessed markets throughout the developing world. That private security giants are moving rapidly to gain a stake in a global market, there is little reason to brush the phenomenon off as ‘business as usual.’

“The extent to which two or three global companies have acquired significant influence within ‘national’ security sectors across the globe is not simply a story of business expansion, but a re-organization of political and security relations. It also has potential social implications [that are] changing how security is provided, for whom, and by whom across the globe,” Williams said.

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Jody Ray Bennett is a freelance writer and academic researcher. His areas of analysis include the private military and security industry, the materialization of non-state forces and the transformation of modern warfare

Story here.

 

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