Blackstone closes on Vivint purchase

Deal will allow Vivint to ramp up inside sales; company also is seeking new CFO
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Wednesday, December 19, 2012

PROVO, Utah—The deal is done: The Blackstone Group has officially closed on its purchase of home automation/home security giant Vivint for more than $2 billion.

The sale gives Vivint, based here, “more flexibility” to do such things as increase its focus on inside sales, company CEO Todd Pedersen told Security Systems News. He expects inside sales to exceed 60,000 customers per year. That’s in addition to the accounts generated by the door-knocking company in its annual summer sales season, which in 2012 was 152,000 accounts, he said.

The company also is looking for a new chief financial officer, because CFO Chris Black is leaving, Pedersen said.

Vivint, then called APX Alarm, hired Black almost two years ago

“He’s been awesome and we had a nice run, but he was able to sell some equity when the transaction happened … and he is taking the opportunity to take a break,” Pedersen said.

“We’ve already started the interview process for the new CFO, but if there are any incredible CFOs [out there] that have run $10 billion companies, give us a call,” he said. “… We kind of have an internal goal to grow the company to $10 billion at some point, so we’re looking for a high-caliber CFO.”

SSN reported in September on Blackstone's planned acquisition of Vivint, but the New York City-based asset management and financial services company just recently announced the closing of the deal.

“Blackstone Capital Partners VI LP, a fund managed by Blackstone on behalf of its private equity investors, acquired Vivint for in excess of $2 billion,” Blackstone said in a Nov. 19 news release.

The release stated that the transaction “includes three primary assets.” In addition to Vivint, the deal includes Vivint Solar, billed as “the fastest-growing solar company in the United States, using power purchase agreements to provide affordable solar solutions to residential consumers across North America,” and 2GIG Technologies, a provider of security and automation equipment for the residential and small commercial markets.

2GIG was not owned by Vivint but the two companies shared investors: Goldman Sachs, Jupiter Partners and Peterson Partners. Now, they’ll both be portfolio companies of Blackstone, with 2GIG continuing to be a separate operating entity.

According to Lance Dean, 2GIG co-founder, the transaction means “business as usual” for the Carlsbad, Calif.-based company, which has more than 2,000 dealers using its equipment.

“We’re excited about our future and we look forward to continuing to grow the business both domestically and internationally,” Dean said in a statement to SSN.

The deal gives Vivint “the capital and support to extend its market leadership,” the news release said. Pedersen told SSN that translates to additional flexibility.

Previously, he said, “we had a pretty complicated financing structure. We were at $700 million plus in financing, and so to have that many banks coordinated and covenants and restrictions on the lending, [it] didn’t enable us to do some of the projects we’re now working on because Vivint couldn’t fund those projects off of cash flow.”

The transaction with Blackstone, he said, “is allowing us more flexibility that way.”

Pedersen said that’s because “the high-yield market is a massive, massive market with hundreds and hundreds of billions a year, and the debt market inside of the security business is very, very small—there’s very few lenders and their maximum holds are very small. It just wasn't scalable for us at our size, and so it restricted our ability to grow the company more than we did.” Also, he added, “it’s expensive debt when you take on these bank facilities in this space. It’s expensive as compared to the high-yield bond market.”

He said one area where the new flexibility will benefit Vivint is inside sales—inbound calls generated by the television and Internet advertising Vivint does year-round.

For several years, he said, the company has been generating about 1,500 new customers a month from inbound sales, and recently has grown such sales to nearly 5,000 per month. “That’s something like 60,000 new customers a year and I think we’re going to be able to grow that pretty substantially,” Pedersen said. “And honestly, that was something we couldn’t do previously because we didn’t have the capital to really focus on that and the summer [sales]. It was kind of ‘either or’—we couldn’t do both of them to capacity—because we didn’t have the financial resources through our lenders.”

Now, he said, “you add capital to Vivint, and we actually can grow.”

Other goals for 2013 include launching in Australia, probably in Q1; adding an energy analytics component to Vivint’s energy management services; and continuing to innovate, Pedersen said.

For example, he said, “we’ve been testing just recently a wireless Internet service that we intend to continue to test out over the next three to four months. And who knows, you might someday see Vivint with a nationwide wireless network.”