G4S becomes ‘world’s biggest IFS’ with ISS purchase

17 October 2011

Jeff Gravenhorst (CEO of ISS) with G4S CEO Nick Buckles (right)

G4S has bought ISS in a £5.2bn deal that creates, it claims, the largest integrated and facilities services group. G4S and ISS revenues in 2010 were £7.4bn and £8.5bn respectively.

G4S believe the acquisition will provide significant growth opportunities and an estimated £100 million of annual pre-tax cost savings by 2014. It will invest £20 million per year by 2014 to creating service excellence centres to share best practice across the enlarged group. The combination of G4S and ISS creates the world’s largest integrated security and facilities services company, by revenue, profit, countries of operation and number of employees.

ISS was already one of the world’s largest facilities services providers with more than 535,000 employees in over 60 countries. It offers its customers a range of facilities services, which include cleaning services, property services, catering services, support services, security services and facility management services.

Commenting on the Acquisition, G4S’s CEO, Nick Buckles said: “We are excited to announce the acquisition of ISS to create the world’s largest integrated security and facilities services group. Since G4S was created in 2004, we have grown our business significantly and have expanded our service offering beyond our traditional security heritage into much broader areas of facilities services and outsourcing to meet growing customer needs. We believe this acquisition will transform our business, significantly accelerate the delivery of our solutions strategy and create substantial value for shareholders.

“G4S and ISS have very similar cultures and strategic ambitions as well as a strong, shared vision for providing service excellence to customers across the security and facilities services spectrum. The acquisition will also provide significant opportunities for staff at all levels to develop and broaden their skills into complementary areas, as part of a team of more than 1 million G4S employees.”

Chairman of G4S, Alf Duch-Pedersen added: “This acquisition brings together two high quality companies and management teams with a very strong business performance and integration track record. We have a compelling strategy, significant experience in meeting a wide range of customer needs and in motivating a large and diverse workforce to deliver excellent service to our customers. I am delighted that ISS’s CEO, Jeff Gravenhorst, will be joining the G4S Board and I look forward to welcoming him and the ISS management and employees into the group.”

The G4S Board believes that enlarged G4S will have a strong base from which to develop its Integrated Facilities Services (IFS) proposition with a significant proportion of 2010 revenue in IFS or solutions contracts (20% of ISS’s 2010 revenue was derived from IFS contracts and 30% of G4S’s 2010 revenue was from solutions contracts).

G4S and ISS operate in complementary geographies with overlaps in over 40 countries, which it is expected will provide significant opportunities for cross-selling. In addition, there are a number of countries where only one business is present today yielding opportunities to broaden Enlarged G4S’s offer in those markets. In particular, Enlarged G4S will be able to build upon ISS’s presence in European countries such as Spain, Italy and Switzerland, while G4S’s presence throughout the Middle East and Africa will provide a platform from which to launch and develop ISS’s service lines in those regions.

G4S will now target what it estimates to be a £500 billion global facilities services market with the aim of developing longer term partnerships with customers, driving better value for customers and generating more predictable, higher quality earnings for G4S.

G4S is the world’s largest security solutions group with more than 635,000 employees in over 125 countries. In 2010, G4S had revenue of £7.4 billion and PBITA of £527 million. G4S’s performance remained resilient during the recent economic downturn, and G4S achieved organic growth of 5% in the first half of 2011.

G4S has delivered year on year earnings and dividend growth since the group was created in 2004 from the merger of Securicor plc and the security businesses of Group 4 Falck A/S. G4S has achieved mid-teens returns on invested capital and average shareholder returns of 13.5% per year since the start of 2005 to the Latest Practicable Date.