Steve Jones has been eyeing with keen interest for the past two years an initial public offering for the world’s biggest private security firm—Irvine-based Allied Universal.
“We want to see what 2024 looks like with regards to the IPO market,” Jones told the Business Journal during an interview at his office near the Irvine Marketplace shopping center, just off the Santa Ana (5) Freeway.
“In 2022, we reserved our name on the New York Stock Exchange and prepared an S-1 filing, but we pulled it given where the IPO market was at that time. Maybe 2025 or 2026.”
If it does go public soon, Allied expects to be valued around $20 billion. Today, such a valuation would make it the third-largest publicly traded company headquartered in Orange County, behind restaurant chain Chipotle Mexican Grill Inc. (NYSE: CMG) and heart stent maker Edwards Lifesciences Corp. (NYSE: EW).
It would mark the largest IPO for an OC-based firm since electric vehicle maker Rivian Automotive Inc. (Nasdaq: RIVN) went public at the end of 2021. The Irvine-based EV maker currently has a market cap of around $18 billion, but often sees fluctuations that push its valuation higher.
Employee Giant
Going public would be the culmination of Jones’ 28-year career at Allied, where he transformed a small security firm then generating $12 million in 1996 to a behemoth with $20.5 billion in sales and more than 800,000 employees, making it the world’s seventh- largest private company.
It now provides protection in more than 100 countries, including war-torn Ukraine and Israel; his guards can be found throughout Southern California, from the Irvine Spectrum to the recent Rose Bowl game that hosted the collegiate semifinals.
The Business Journal awarded him with a Businessperson of the Year designation for 2019 and an Excellence in Entrepreneurship Award in 2020. Allied’s grown substantially larger since then.
“I’m very proud of the company’s rise to the rank of global leader through strong organic growth and strategic acquisitions over the past 13 years,” Jones said.
“We have been highly successful in bringing great organizations and their talented people onto the Allied Universal team and creating a very special organization that leads the world in providing security services.”
WM Roll-up Strategy
Jones has grown through organic growth and acquisitions, admiring how Waste Management Inc. grew by rolling up competitors around the U.S. and streamlining procedures such as hiring and training.
In December, Allied made its 100th and 101st acquisitions: Seattle-based Star Protection Services, the largest privately owned security company in the Pacific Northwest with six branches, and Costa Mesa’s Nordic Security Services, where Jones has known owner Peter Jensen for more than a decade.
Allied typically makes around a dozen acquisitions annually. However, with the Federal Reserve raising interest rates, Allied last year only completed five out of the 50 to 60 companies it studied.
“We’re being much pickier with regards to the deals we’re doing,” Jones said. “It has to be the right deal strategically for us.”
It’s looking to expand in specialty areas, like event services, which provide security at concerts and arenas. While Allied is in more than 100 countries, there are still some big countries where it doesn’t have operations, like France, Spain, Germany and Italy.
“Those are very large markets with a tremendous opportunity.”
He’s expecting the pace of acquisition to pick up this year as his investors, who he describes as some of the world’s largest banks, are predicting the Federal Reserve will lower rates about 75 basis points in 2024.
$25B Goal
Jones’ biggest acquisition by far was the 2021 purchase for $5.1 billion of London-based G4S PLC, which resulted in his company’s revenue more than doubling to $18 billion.
Since then, he’s added more than $2 billion in annual sales and is still aiming for $25 billion in the coming years.
“$25 billion is still the goal. We may be a year or two behind, but not much.”
When it goes public, he wants investors to view Allied Universal as “a comprehensive security solutions provider.”
Jones points to a worldwide increase in criminal activities as well as civil and social protests. His employees must manage the aftermaths of natural disasters when chaos ensues.
He has a technology division that generates about $1.7 billion in sales by monitoring security cameras, alarm systems and entry gates. It also monitors social media websites and alerts customers to pending protests near their stores or buildings.
“Every morning, we know where there will be protests,” Jones said. “We can tell our clients if there will be a protest by their facilities.”
In North America, the need for businesses to protect themselves is soaring, due to understaffed law enforcement agencies that spend larger portions of their time tackling issues like homelessness, and shoplifting crimes that have been decriminalized.
An active shooting incident is occurring once a day in the U.S., he said. One of his units has grown to 3,500 dogs trained to detect weapons. In a recent quarter, its dogs identified 4,000 different guns, which Jones said “prevented bad things from happening.”
“All these things create the need for comprehensive security solutions. It’s not just people at the door. It’s cameras. Controlling access. In some cases, it’s protection for the executives and employees.”
Jones knows investors won’t be as excited about Allied as an EV or Silicon Valley firm, so he sees a valuation for the company of around one times sales, or about $20 billion. While he’s not eager to make the quarterly earnings report every 90 days required of public companies, he says he already does so with its lenders. He expects organic growth in the mid-single digits, aided by acquisitions.
“We’ve proven with over 100 acquisitions that we can continue to acquire and scale this business,” Jones said.
“We’re not going to have the margin profile of the tech businesses. What we do have is we generate consistent cash flow very predictably. Our business is very steady and has consistent growth.”
He plans to stay in Irvine, noting his company recently signed a 10-year lease for the company’s current headquarters, which it moved into last year.
“We’re an Orange County company.”
What Security Executives Fear
Allied Universal constantly talks to executives in charge of security for their companies around the world.
Last year, it decided for the first time to release—on Sept. 11—its report to the public of its survey of 1,775 security offices. Revenue at the respondents’ companies is a combined $20 trillion, or about a quarter of the world’s total annual gross domestic product.
“It’s interesting reading,” Allied Universal CEO Steve Jones said. “It shows what chief security officers are worried about for their companies. “
The report helps security executives “pounding the table for more resources” from their boards, Jones said.
The report’s highlights:
• In 2022, more than $1 trillion was lost by companies due to internal and external physical security events. About 25% of publicly listed companies reported a drop in their corporate value in the last 12 months following an external or internal security event.
• Security budgets represent 3.3% of global revenue at the respondents’ companies, around $660 billion.
• 65% of respondents said their company currently uses predictive technology to enhance security and intends to increase it in the coming 12 months.
• 90% said cyber threats that threaten physical security systems are challenging operations.
• 89% said their company experienced some form of internal threat; 35% said misuse of company resources or data was the most common. About 36% cited leaking sensitive information.
• 42% consider artificial intelligence and AI-powered surveillance to be at the top of their future investment list in the next five years.
