Goldman, Beekman see value in NorthStar

The Utah summer-model company says those two new equity partners will enable it to grow faster
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Wednesday, May 22, 2013

OREM, Utah—The fact that Goldman Sachs and The Beekman Group are NorthStar Alarm Services’ new equity partners is a “vote of confidence” in that summer sales company, according to Henry Edmonds, president of The Edmonds Group, which facilitated the transaction.

New York-based private equity firm Beekman led the recapitalization of NorthStar, based here, and is new to the security space. “This is the first investment they’ve made in the alarm industry but they have looked at other opportunities over the years. They have been looking at deals for some time but just hadn’t found one that was the right fit for them [until now],” Edmonds said.

John Troiano, CEO and managing partner at Beekman, issued a statement saying: “We found an extremely attractive platform in NorthStar. We are excited to partner with NorthStar's management team and value not only the successful growth already achieved, but the culture of integrity, accountability and service that [company President] Jason [Christensen] has built from top to bottom in the organization.”

Investment banking firm Goldman, also based in New York, is experienced in the security space. Companies it previously worked with include ASG Security and Vivint—until The Blackstone Group acquired Vivint last year for more than $2 billion.

“Their presence in the industry has been primarily as a lender but they were the equity sponsor behind Vivint, and that was obviously an extraordinarily successful deal,” Edmonds said. “So I know that NorthStar felt and I feel that it is a sort of vote of confidence that they see in NorthStar a lot of the qualities that allowed Vivint to be so exceptional.”

NorthStar announced the recapitalization last week. It also announced that in conjunction with that deal, it got a $10 million infusion from Bank of America and Zions Bank, upping its total credit facility to $40 million.

Christensen said NorthStar has worked with Bank of America since 2009. Last year, Bank of America, along with Zions Bank as a secondary lender, increased NorthStar’s credit facility from $15 million to $30 million.

“We have worked with NorthStar for a number of years. We continue to be impressed by the consistent growth and solid financial performance of NorthStar as led by Jason Christensen and his strong management team,” David Stang, senior VP and senior client manager with Bank of America, said in an email.

Edmonds, founder of The Edmonds Group, a specialized investment bank based in St. Louis that focuses on recurring revenue businesses, said there is a lot to like in 13-year-old NorthStar, an authorized dealer of Honeywell security products.

 “NorthStar, other than Vivint, is the only truly independent summer program that hasn’t been part of a dealer program [and] that hasn’t been selling off their accounts. They’ve been able to retain their accounts for the last 10 years or so and built up a very nice business so they’re impressive in that sense, and they have enjoyed the positives of the summer world, which is exceptional growth and really good performance metrics,” Edmonds said. “Their creation cost is healthy, their attrition rate is in the very positive single-digit range for the industry. They’ve done a lot of things right and it’s not that often that you find companies that are doing all those things right.”

Edmonds declined to say what percentage of the company Beekman and Goldman own but said Christensen is “still the significant shareholder” and continues to run the company.

“He brought them in as partners for the same reason that the folks at Vivint brought Goldman in as a partner—which was to have the benefit of both their ability to help companies raise capital and also now Goldman’s expertise in the business,” Edmonds said.

Christensen also didn’t answer questions concerning the specifics of Beekman’s and Goldman’s investment in his company. But he told SSN in an email interview, “We are excited to enter into this new phase of growth and for the company to continue to improve and evolve with the additional support of new partners.”

Founded in 2000, NorthStar provides home security/home automation services in 18 states. The company said it has grown by more than 30 percent each year during the past six years and its RMR currently exceeds $1 million.

Christensen said the company primarily generates accounts through door knocking, which is also known as direct sales. Since 2005, he said, it has kept all of its accounts in house. It currently services about 24,000 customers and Rapid Response monitors all of its accounts, he said.

The new partnership will allow NorthStar to grow at a faster rate, Christensen said. In 2012, he said, the company added about 7,000 accounts. “Our focus will be to continue to grow organically through our internal sales force while staying true to our mission and core values,” he said.