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It’s about customer relationships

ImageThanks to the poor economy, both here and even more so in the U.S., it’s been a relatively quiet year for mergers and acquisitions in the industry. But when Bloomberg news reported late last month that GE was looking to sell off its security division it set the industry abuzz, but came as no big surprise at the same time. The question from most people I talked to was what within the GE Security division is of interest and who can come up with the kind cash it might command, at what is probably the bottom point of the recession?


September 11, 2009
By Neil Sutton
Neil Sutton

Topics

The story, which was broken by three Bloomberg News reporters, hit the
news Aug. 26. When quizzed, the company refused to comment on “rumour,”
but industry experts did not hesitate to weigh in on what they thought
was wrong with GE Security. For starters, GE’s executive didn’t get the
passion the industry has for relationships. The analyst I spoke with
suggested most of the experienced field staff who held the
relationships within the companies GE acquired were moved out of their
roles and GE people were moved in. The suggestion is they treated
security like it was any other division in their vast organization.

What Sandra Jones said rings true to me of this industry —
relationships matter very much and involves building a certain degree
of trust. No surprise, I suppose, when you think that what you’re
buying involves placing a large degree of confidence in someone who is
offering you safety and security.

GE’s apparent move to ask JP Morgan Chase to now find a new home for
the security division is likely a combination of the results of the
economy’s retraction and its decision to do what many companies are
inclined to do when the market gets rough — return to core competencies
while freeing up cash to support operations.

It’s a good opportunity to consolidate product lines and technology
platforms given already strained budgets are no doubt impacting big
platform sales. But in this economy who might be a likely suitor?
Anyone serious will have to be able to take it on and know it will
significantly move the balance sheet in the desired direction. Can GE
Security really make such promises?

And who else would have the cash to consider such a buy right now and
do they see it as a company that could add to their current client
base? Some end-users I talked to say they couldn’t really recall GE
Security having any products or “mind shattering technology” that was
exclusive to them, although one major Canadian customer said GE had one
of the only robust access control platforms that could be installed
across the company’s entire geography.

He also noted the company had cut back on maintenance contracts with
vendors in general, which may have accounted for the poor customer
service. “We have work to do on our end to ensure a strong relationship
as well,” he told me.

Whenever a big deal like this is on the block the question is always
how will customers benefit or lose? One I spoke with who is responsible
for a large property in Canada and specifically has the Edwards fire
system installed said, “I don’t really care as Edwards has been bought
and sold about five times in the last 10 years and the service never
changes.”

When I asked him how he would define that service he said “tolerable.”
Not exactly a ringing endorsement. And perhaps that’s where the buyer
could make a big difference in how customers receive the brands GE has
put together. If relationships and service are really the cornerstone
in this business — and I hear it all the time — would it be so
difficult for someone to make those kinds of important changes?

It will be interesting to see how GE presents itself in the days ahead.
GE Security’s president of the Americas, Mark Barry, is slated to speak
at the “View From the Top” session at Securing New Ground in November,
alongside Stanley, Axis Communications and Johnson Controls, but will
likely have to take a pass if they are being shopped around. And at
this point, do they really share the view from the top that those other
brands do?


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