On April 18, 1906, San Francisco fell victim to one of the largest fires in U.S. history. The flames blazed for three straight days and ultimately destroyed more than 500 city blocks of San Francisco’s downtown core.
Luckily, technological achievements in both infrastructure and fire prevention have come along way in the last 99 years, making such rampant destruction more preventable. But ultimately, fire safety relies on constant vigilance from city, state and federal and regulators who consistently modernize the fire codes, as well as businesses that provide fire and life-safety services and equipment. For Gryphon Investors, a San Francisco-based buyout shop, the steady cash flow generated by the constant updating of fire prevention and safety codes makes investing in Consolidated Fire Protection LLC an attractive prospect from a private equity point of view.
Earlier this month Gryphon acquired Consolidated Fire Protection from Los Angeles-based private equity firms Caltius Capital Management and Westar Capital LLC. Financial terms were not disclosed. Jerry Rose, former vice-chairman of real estate services firm Jones Lang LaSalle; Jim Didion, former chairman and CEO of CB Richard Ellis; and Consolidated’s management team, are co-investors with Gryphon in the transaction. Rose will become executive chairman of the company and Didion will serve on the board of directors.
Consolidated, based in Irvine, Calif., is the largest independently-owned fire and life-safety services company in the U.S. The company’s Cosco and Firetrol subsidiaries-which were both acquired and put under the Consolidated umbrella by Caltius and Westar in February 2000-operate separately in markets across the Western U.S., offering design, installation, inspection, repair and service of fire safety systems for commercial, industrial and institutional customers.
When Caltius, which at the time was called Libra Capital Partners, and Westar built the Consolidated Platform in 2000, the combined company was generating total revenues of about $52 million, according to a Buyouts article published at the time. For fiscal year 2004, Consolidated reportedly took in more than $100 million in revenues.
Nicholas Orum, a partner at Gryphon Investors, told Buyouts that consolidated operates in a highly fragmented $9 billion marketplace, and that there are two trends that work to Consolidated’s advantage. One: City and state controllers are increasing fire codes and regulations more frequently, which, increases demand for Consolidated’s products and services. Two: The commercial real estate industry is in the early stage of a recovery-a factor which could prove to be the flashpoint for a controlled explosion in Consolidated’s business.
But growth for Consolidated, while it is a part of Gryphon’s portfolio, will not to hinge solely on industry trends. Orum said Gryphon will commit capital to the company to spur growth in three areas. “We want to continue to support [Consolidated’s] effort to expand their national account program, which they started last year; we will provide them with capital they need to open new offices; and we will provide them with the capital necessary to make add-on acquisitions,” he said.
Equity for this transaction came from Gryphon Partners III, which is still raising capital from investors. The target for that fund remains undisclosed. Gryphon typically places between $50 million and $75 million of equity throughout the life of each of its investments. The deal’s financing came from Madison Capital Partners, which provided the senior debt, and New York Life, which laid down a mezzanine tranche.