Todd Jacobson
WC Monitor
10/31/2014

G4S Government Solutions, the G4S subsidiary formerly known as the security contractor Wackenhut, will be sold to private equity firm Alvarez & Marsal Capital Security Holdings, LLC, WC Monitor has learned. The firm is an affiliate of Alvarez & Marsal, a global professional services company. G4S, the massive international security company based in the United Kingdom, put up its U.S. subsidiary for sale last year, and while company officials had hoped to wrap up the sale in early 2014, the process took longer than expected and could be wrapped up as early as next week.

Top management for G4S Government Solutions is expected to remain in place under the deal, including President and CEO Paul Donahue. The sale price is unclear, and G4S Government Solutions declined to comment, with Donahue saying, “As a public company, I legally have no comment at this stage.” 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.

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.

G4S Put Gov’t Solutions Up For Sale Early Last Year

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.

Sale Price Undisclosed, but ‘It’s Not a Firesale’

G4S put the Government Services group up for sale early last year, drawing initial interest from approximately 150 suitors. When G4S put Government Services up for sale, it said “an alternative parent would be able to create or add more value to the business than G4S. As a non-US parent, with restricted access to important commercial data, our ability to manage the business and share best practice is severely limited.” G4S was rumored to be in serious talks with three firms about a year ago, but was in talks with Alvarez and Marsal for the last year hammering out the deal.

While the sale price hasn’t been disclosed, Donahue said in an interview last year that G4S wasn’t planning to let the subsidiary go for cheap and would only sell for the true value of the company.  “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.”