CSG to soak up Sun Belt

Thursday, September 1, 2005

TULSA, Okla.--Aiming to double its number of authorized dealers, Central Security Group in late June started to expand into four new territories in the Sun Belt.
CSG President Mark Wilson said the company increased the purchase price for accounts to entice new dealers in the Sun Belt states of Arizona, California, Georgia and Florida into its network.
"We are paying 36 times RMR for top quality accounts. That's between two and six multiples higher than the industry average," Wilson said. Wilson expects to add 100 dealers as a result of the initiative, doubling the size of the company within one year.
CSG met with quick success in the early stages of the venture, adding five Florida dealers in the first month.
Security Systems News reported in March that CSG expected to expand into the Florida market within the next few years.
"We got on a little faster track," Wilson explained.
Great Hill Partners, a Boston investment company, purchased CSG from Stolberg Equity Partners in January 2005, in a transaction that Wilson characterized as a recapitalization.
Wilson said the backing of Great Hill Partners increased CSG's capacity to grow.
"The response (to the enhanced dealer program) has been terrific and we haven't even had a chance to advertise or exhibit at shows," Wilson said. "Most new dealers are added by word of mouth, by referral from other dealers."
Wilson expects quick results in Florida. "In the past we've had to turn away dealers because we were not doing business in Florida. Now, we will re-contact dealers to tell them we can purchase their accounts in Florida, and we expect to see an immediate influx of dealers," Wilson added.
Chris Gaffney, managing partner and founder of Great Hill Partners, said the program attracts high-quality dealers and accounts. "Their churn rate is the lowest I've seen in the industry," he said.
As part of the January restructuring, Great Hill Partners put capital in place and established new credit facilities for CSG.
"We're happy to finance as many accounts as they can find," Gaffney said.
CSG has been in the alarm business for 30 years. Wilson and two partners purchased the company in 1999 with the intent of taking it from an Oklahoma company to a regional company.
The trio succeeded in extending the business to include Texas, Kansas, Missouri and Tennessee before CSG purchased them. Nearly 90 percent of its customers are residential.