ACRE’s Joe Grillo talks new equity partner, outlook for company, industry

YARMOUTH, Maine—Security Systems News sat down, via Zoom, with ACRE CEO Joe Grillo to talk about the recent deal that brings new ownership and investment partner, Triton, on board, after a very successful run since 2013 with ACRE’s prior private-equity partner, LLR Partners.

In this candid interview, Grillo talks about the exciting next phase for ACRE, the future for the company’s many brands (Vanderbilt, RS2, Open Options, ComNet, and Razberi), the state of access control, and what 2021 and beyond might look like for both ACRE and the security industry as a whole.

SSN: What would you say is the biggest takeaway from the deal?

GRILLO: No massive changes to strategy, but continue to do what we are doing, but in a bigger and faster way. We are very happy that we changed financial partners but still have the ability to operate independently and grow. So, I think we are entering an exciting next phase of ACRE’s growth and existence.

We have found a partner who has really studied the space and has a lot of ambition and views about how there may be drivers that are happening out of the most recent environment [COVID] that may accelerate some of the changes technologically and transition to different types of off-premises systems vs. on-premises systems, things like that. We are very excited that they are very excited and really got behind the trends they see in the industry and us as a platform.

SSN: Overall, I would think this opens things up for you again, starting fresh, so to speak, with a new investor?

GRILLO: We had a great run since 2013 with LLR as our private-equity sponsor and partnership with them for many years. And clearly the business model for private equity is to buy and hold and grow and then exit, so it was time for LLR to do that. They were very supportive, we had a great partnership, and as we went into the process knowing that it was time during a challenging time during 2020, the business held up quite well and we reached an agreement to move forward with a different investor.

Triton is a very similar model, of course, private equity, but this one is European based, and much larger, so I think that has us excited because that brings greater resources to help grow the business going forward.

With Triton behind us, our strategy remains to be and to continue to be – and grow – as what we like to call the largest independent supplier of access control and related products sold through those same channels; that has never changed. We have opportunities because we are in the beginning of the investment cycle, and not the later stages, which allows us to invest in more R&D, or sales and marketing, and to continue to look at acquisitions as we always have been relatively acquisitive – something like eight acquisitions in nine years – since the company was founded in the fall of 2012.

I really feel we can now move faster in growing the company both organically and through acquisition.

SSN: Speaking of M&A, how does the landscape look on the acquisition side? Any specific areas you are eyeing?

GRILLO: There are a few things to say on that but let me start by giving a pat on the back to our partners LLR, because in the middle of this process in 2020 we did this small acquisition of Razberi, which wasn’t huge but very nice and strategic. So timing and opportunity are everything, many times, and plays a part in any deal and decision, but we are strategically looking in the spaces that we always have, so access control, as well as video, credentials and other security-related types of businesses and product segments or geographic areas. Maintaining that channel strategy we have, and leveraging the channels that we do have – that for me is what we have always been about as a company.

Access control has always been a very rich and highly fragmented space, so it is harder to find companies of scale, but now we have opportunities to look at some things that may be more transformative with deeper pockets.

And looking at 2021 versus last year, the landscape has changed drastically with how we do deals, in general, so if you look at how we were acquired, it was a process where we never met any of the possible bidders in person. If you had asked me three years ago, would you buy or sell a company and never meet the investors or the management company in person, I would say no, but the world has learned how to do things, even deals like this, remotely, so that opens up things.

SSN: Can you talk about the evolution and the development of the ACRE brands?

GRILLO: Everything that we acquire doesn’t become a brand. Razberi is a well-known product name, sure, but it is not a company brand, and we announced some level of consolidation between Vanderbilt and Open Options organizations. So everything does not stay a brand, but we will go slowly and carefully as we analyze new acquisitions over some period of time to evaluate the people, the technology, the brands, and then make decisions accordingly.

Maybe we go a bit slow, that could be a critique, but I also like to refer to one of my mentors in life that I worked with for a long time who used to say, “Joe, you can’t put the toothpaste back in the tube.” Another good one is, “measure twice and cut once.” So, we will always be careful looking at the brand technology market before we rush to get rid of a brand or add a brand or something like that.

SSN: How was business in 2020 and how does it look this year for ACRE companies?

GRILLO: We are anticipating growth in 2021, but let me touch on 2020 first. We were off about 5 percent for 2020 versus 2019, which I don’t think is bad at all, and probably better than maybe some players in this industry and others performed. We weren’t selling bicycles [laughs], so we didn’t do that well, or lumber I guess, but we had a decent year. We didn’t spend as much, so we were quite strong financially on the bottom line. I think we expect to get back to and beyond where we were in 2019, but there is still some uncertainty. The first quarter is going well; we are actually ahead of last year, and last year’s first quarter was before all the “you know what” hit the fan. So, we are looking good, but look at Europe where the economies continue to be shut down; I think people will continue to be cautious with their budgets.

Our long-term view is that this is a great industry and a great space to invest in; certainly Triton understands that and signed up for that. I think we will have growth this year and I don’t know if it will be double-digit, but we feel really good about it. There is a lot of activity and it continues to pick up. Projects are coming back. A number of things in how organizations behave, want to track people, visitor systems, and lots of things, are positive drivers, as well as the potential dampening effects still of the macroeconomics situation with the virus environment.

I think things are slowly getting back to normal, with the really strong quote activity, and a lot of sales activity and opportunities seem to be coming more into alignment.