Formerly Known as Wackenhut, Security Contract Bought by Alvarez & Marsal Capital Security Holdings
Todd Jacobson
NS&D Monitor
11/21/2014
G4S Government Solutions will be sold to the private equity firm Alvarez & Marsal Capital Security Holdings, LLC, for $135 million, its parent company said last week. G4S, the global security company based in the United Kingdom, did not publicly reveal the buyer of its government solutions group, the security contractor formerly known as Wackenhut, but NS&D Monitor previously reported that an affiliate of global professional services company Alvarez & Marsal was set to complete the purchase.
The sale price includes $80 million in cash and $55 million in receivables that will be paid over 18 months after the sale is complete. G4S said the sale is expected to be completed by the end of the year, though NS&D Monitor has learned that it is likely be wrapped up in the coming weeks.
‘It’s Not a Fire Sale’
Top management for G4S Government Solutions is expected to remain in place under the deal, including President and CEO Paul Donahue. G4S Government Solutions has declined to comment on the sale until it is completed, but in an interview last year, Donahue said the unit wasn’t being sold on the cheap and would only be sold for its true value. “True value includes the inherent value of our company that has a 50-year track record—otherwise, it would not be prudent to sell,” Donahue said. “It’s got to make sense. It’s not a fire sale. It’s not a liquidation sale.”
G4S Government Solutions manages protective force operations at a host of Department of Energy and National Nuclear Security Administration sites including Hanford, Savannah River, the Nevada National Security Site, and Sandia’s California campus. It also has security contracts around the world for the Pentagon, including an operational support contract at the Navy’s base in Guantanamo Bay, Cuba.
Alvarez and Marsal has dozens of offices around the world, and is best known for its corporate restructuring work and its work with distressed companies, having played a major role in the Lehman Brothers bankruptcy as well as with other restructurings, like HealthSouth, Arthur Andersen and Tribune Company. Its affiliate, Alvarez & Marsal Capital Partners, “invests in middle-market companies that can benefit from access to world class operational expertise, are undergoing management transition or are seeking capital for growth or acquisitions,” according to its website. Alvarez & Marsal Capital Partners and Alvarez & Marsal Capital Security Holdings, LLC, are not believed to own any other security companies.
As UK Company, G4S Couldn’t Exert Enough Control Over Gov’t Solutions Unit
G4S (then known as Group 4 Falck) acquired Wackenhut in 2002 for $573 million, but a shakeup of the parent company’s leadership in the wake of several recent scandals—including its handling of security at the 2012 London Olympics—created uncertainty about its business with the U.S. government, where the parent company holds no control of the company because of a proxy agreement that firewalls the government solutions unit from the rest of the company.
G4S Government Solutions was also at the heart of a security scandal at Y-12 last July when three elderly peace activists penetrated the most secure areas of the facility, vandalizing the Highly Enriched Uranium Materials Facility before they were finally arrested. As a result of the incident, G4S Government Solutions was removed as the security contractor at Y-12, and it later lost out on a bid to hold onto the rest of its DOE work in Oak Ridge.
