How did Bear Stearns come to hook up with Giuliani Partners on security and public safety investing?
Until I joined Bear Stearns three years ago, I was in Washington, D.C. working as a lawyer with Kirkland & Ellis. During that time, I was involved in a couple of defense transactions. Defense-contractor transactions are different than any other kind of transaction you might deal with in the private equity world. After I came to Bear Stearns, I spent a lot of time looking at government defense companies with a security angle. A year ago, through a friend of mine, I was introduced to Rudy Giuliani and Giuliani Partners. After a year of discussions and sharing opportunities, that relationship was formalised in a joint venture.
What does the Giuliani team bring to the table?
A lot. What Rudy has done is to assemble a bunch of people from government that have a lot of experience in dealing with first response. The first example would be Bernie Kerick, the former head of the New York City Police Department, who is now over in Iraq putting together police infrastructure. Bernie can be very helpful in the evaluation and development of portfolio companies in any kind of protection device or police-type product or service. They also have Tom Benesson, who is former head of the New York City Fire Department. Tom is very knowledgeable about first response in connection with fires that may result in connection with terrorist activity. We are looking at fire protection systems.
Obviously, Rudy himself has a fair amount of experience having dealt with what he did in September and before that. He has a real passion for getting hands-on with security-type companies. His consulting business at Giuliani Partners is focused on that.
What do you like about the security space?
We generally believe that, in light of the increased dollars being spent on security and the heightened awareness to the space, there will be a long, sustainable trend for growth and new solution-oriented programs.
Do you think management teams will see the value of having Giuliani Partners involved?
Affiliating with Giuliani will make management teams comfortable that we know the space. Management teams will feel, rightly, that we will be able to bring a lot of value post-closing by opening doors and adding customers to their existing customer base. Giuliani Partners will enable us to more effectively compete for high-quality security companies and provide for enhanced revenues post-closing.
Besides governments, what types of clients are increasingly buyers of security-related services and products?
A classic example would be high-end commercial buildings that want to have in place both IT systems securities to make sure people can't hack in, as well as security in the sense of being prepared for terrorist activity. Other clients could consist of airports – outsourcing certain functions. Obviously, the US government took over airport security itself, but there are still other facets in terms of safety protocol where there are opportunities.
What kinds of investment opportunities are you looking at right now?
Of course, it's difficult to describe in detail any deals that we have evaluated without identifying the company, but we have looked at transactions in the guard service space, the armored car and cash-service arena, outer-gear companies, first response companies.
Have you come across misperceptions about what this joint venture is trying to accomplish?
We're getting inundated with venture capital-type phone calls from people who invented something in their garage. But we're looking to buy companies with significant cash flow that already have established relationships.