Interview with Joseph Grillo, CEO of ACRE and CEO/Managing Director of Vanderbilt International

If these factors and reasons to invest are embraced and recognized industry-wide, how will you and your team do it differently? Executives in the electronic security and identification industries may recall a time in the not too distant past, when a series of acquisitions led by a recognized leader in the physical security business took the industry by storm. That leader, ­Joseph J. Grillo, drove a consolidation effort within HID and Assa Abloy's business growth streams with the vision that a fragmented electronic access control market was evolving through advancements in identification technology to protect both physical and digital environments. Today, Joe Grillo's name is associated with a new company: Vanderbilt Industries, which last month entered into an agreement to acquire Siemens' Security Products (SP) business, part of the Siemens' Building Technologies Division. The newly acquired business will be renamed Vanderbilt International (VI) with the sole focus being a strategy of maintaining and growing its leadership position in offering integrated security systems incorporating Access Control, Intrusion Alarm and Video Monitoring systems. Here, Joe Grillo gives his take on the past, present and future of the industry.

GIT SECURITY: Following the recent announcement of Vanderbilt's ­acquisition of SP, do you plan a ‘shopping spree' similar to what we saw at the time of Assa Abloy's expansion?

Joseph Grillo: First of all, it is worth noting that Assa Abloy has continued to grow and be acquisitive, maybe at an even greater pace in the years since I left. Under great leadership and execution of their strategy, they have clearly outdistanced all their competitors. At HID, even before Assa Abloy, we combined some key acquisitions with substantial organic growth to build the world's leading card and reader manufacturer. Assa Abloy, which acquired HID in 2001, then gave myself and our management team the opportunity (and of course the treasury) to bring together a number of industry players, especially in Europe. We fairly rapidly acquired Indala, Omnikey, Sokymat, Metget, ACG, Interlock and Fargo Electronics just to name a few. We integrated their product offerings to acquire greater technical expertise, global market share, a broader array of products and began to move the company from being simply a card and reader manufacturer to an Identification Business. This proved to be a successful proposition and it continued after I left under successors that I personally recruited. I'm proud of that legacy. Today, we again see indications that the time is ripe for a season of change in the security industry. The fragmentation that existed in the access control market when I left the industry in 2008 is still quite evident with even more new market entrants on the scene. I believe this creates consolidation opportunities for companies with the requisite industry knowledge, technical competence and market experience. We have all of these at both ACRE and Vanderbilt, and, because we are well financed, it is reasonable to expect we will grow our two platforms both organically and through acquisition.

The most recent of these has been the SP acquisition. What does this mean both for your company and the industry in general?

Joseph Grillo: Vanderbilt saw an opportunity to expand its product offering and geographic market coverage. The addition of SP represents significant value potential with its established installed base of customers and loyal resellers. The market trend is for integrated security management systems and more open solutions from trusted suppliers. SP clearly provides a vehicle to offer these solutions to a broader customer base. This also considerably expands our presence in the security industry by broadening the company's competitive position in a highly fragmented market with great growth potential. The acquisition fits our corporate strategy perfectly - and matches Vanderbilt's solid foundation and strong legacy built from nearly three decades in the security industry. As far as the security industry is concerned, market trends show customers are looking for integrated security management systems and more open solutions from trusted suppliers. VI will now provide these solutions to a global customer base and, from the complementary Vanderbilt Industries' product business, customers will have increased R&D and support resources to provide our channel partners with new products and programs that are designed to meet their specific needs. They can also expect to see an increase in converged and vertical market solutions for secure identity related applications.

More generally, how would you characterize the current state and positioning of the security industry?

Joseph Grillo: In spite of the fragmentation, the security industry has been - and continues to be - a steadily growing business. The opportunity to leverage this, while simultaneously consolidating and integrating the highly fragmented Access Control "OEM" segment, is an opportunity we have analyzed and are executing on. In many cases, large multi-national companies that have consolidated and integrated security products into their product portfolios have produced inconsistent results. We believe that both our experience and our approach will provide for a very positive result.

Are there key reasons today for investors to look at opportunities in the security industry with re-invigorated interest?

Joseph Grillo: There are indeed. To name the most significant, I would differentiate between the following categories of market trends:
Market-related: Security has become mainstream, and as a business, it has become ever more important for organizations to protect their most valuable assets. A decade or two ago we were most inclined to focus marketing efforts on the largest corporate end users and government sectors. Today, not only in the States, where a CSO function has been long-established in the corporate world, security investment is on the rise in every market segment: hospitals, public infrastructure, educational facilities at every level, and for all businesses from small to medium sized enterprises to the largest corporate end users. And integration of sub systems is as important as ever, particularly of video and identification.
Application-related: convergence of the physical and digital worlds, now intertwined and "managed" via smart applications, drives demand for new systems capable of offering controlled access to both domains seamlessly while supporting all corporate functions and maintaining easy operation.
Technology-related: technologies transformed by the digital revolution have matured and are increasingly being adopted in the slow to change security industry. The use of video monitoring and management has exploded, as has the need for integration of video and access/alarm monitoring. The use of mobile devices to manage these systems is being demanded by busy security executives and protective forces. These changes are helping drive market demand.

If these factors and reasons to invest are embraced and recognized industry-wide, how will you and your team do it differently?

Joseph Grillo: As I indicated earlier, we believe we will be successful because of our past experience and a very different but focused approach. Our approach is to focus primarily on consolidation of the highly fragmented ‘OEM' step in the electronic access control market value chain. The key to this strategy is a belief that using ACRE portfolio company Mercury hardware (control panels) as a foundation for the consolidation provides a unique opportunity to offer a more ‘open' environment that is highly desired by both the end user and consulting communities. Bolt on acquisitions will be much easier when only the "front end" software is proprietary.

If you could pick the most important things to duplicate every time you make an acquisition or start a new venture, what are they?

Joseph Grillo: First and foremost, have a good strategy. Communicate this to the three key stakeholder groups; customers, suppliers and employees. Back this up with good products and unparalleled technical support and customer service. Execution is the challenge you face on a day-to-day basis. By providing the right leadership and culture within the organization(s), you can recruit and cultivate leaders and team players to allow you the best opportunity for success. And of course, a little luck never hurts!!