Q and A with ADT’s John Van Schepen

Canadian Security: The merger was announced in April. How is the integration of the two companies progressing?

Van Schepen: I think it’s going very well. I think it’s going to be a positive thing for ADT’s business and our business in Canada. I think we’re better together than we were separately and there are some real opportunities to leverage their geographic footprint and for them to leverage some of expertise, whether it’s IP or monitoring.

On the guard side, ADT is absolutely committed to growing our guard business with us. They have a very small guard force here in the GTA and they have some mobile vehicles here and mobile patrol officers. They do outsourced response work in other markets we have business in, mostly in Calgary and Vancouver, so I think we’re going to have opportunities to pick up some of that and bring it in here as we have the critical mass to handle that kind of business more effectively.

CSM: What advantages do you see the merger creating for your existing customers?

Van Schepen: I think it puts us in the hands of a company that is solely focused on security. From a strategic, long-term perspective it’s a more stable ownership structure than being part of First Service was. I think there’s good and bad that comes with the skill that ADT brings but I think the good for our clients is that they are a huge stable company that wants to grow the security business and they like the model we have presented to our customers and they want to expand that.

CSM: I imagine some of your current clients were ADT clients at some time in the past. How are you explaining or marketing the newly merged company to them?

Van Schepen: I visited with a lot of clients after the announcement went out to talk to them about any concerns that they had. The service levels we have are appreciated by our clients and that’s the biggest thing ”“ they don’t want to see us water down the service levels that we have. Certainly that’s not something ADT is going to do. They want to grow this business, not shrink it, so they know that our customers have certain expectations and those commitments need to be met going forward to retain and grow those relationships. So is there concern? Yes, there is always concern, but I was actually surprised that the level of concern was as low as it was. We didn’t have any clients that reacted in a really strong way.

Van Schepen: No. There have been no changes on that front at all. On the guard side we’ve added a significant amount of business since the deal was announced. I think the message we put out to our client base and prospective clients is that Intercon is going to stay doing what Intercon has always done. We were obviously concerned about losing any accounts but to the contrary we have gained large blue chip clients. No one has been scared away by the transaction.

CSM: How are you going to market with the two brands now?

Van Schepen: We are still getting to know the ADT people in the local markets here in Canada, but the Advanced Integration Division will be differentiated from ADT’s residential or small commercial business. I think it would make sense to pool up some of those businesses. We have a small residential core, for example, and that may be better handled within their structure. Some of the small commercial we do ADT is well suited for that, whereas some of the higher end stuff they do that comes out of the national account relationship we can really benefit from that here.

The non-guard piece of our business will move over and be part of ADT Advanced Integration ”“ a division within ADT. The guard side of our business including our mobile response will remain as Intercon.

CSM: What is the size of ADT’s guard organization?

Van Schepen: It’s very small, I think they have about 45 guards in the GTA between mobile and static guard coverage.
  
CSM: How does the guard portion of the business fit with ADT?

Van Schepen: I think what attracted them to the acquisition was clearly the advanced integration side of the business. They were well aware of the guard piece here. It is a very well recognized brand and reputation in the three markets we operate in.

CSM: Will the branding continue to be ADT/Intercon?

Van Schepen: What the plan will be is the non-guard piece of our business will move over and become part of ADT Advanced Integration. The guard side of our business including mobile responses and everything will remain as Intercon and everything else will remain the same for the Intercon side.

CSM: Is there a new president or vice-president for the Intercon side of the business?

Van Schepen: We haven’t got to the point — structurally we’re still the same as we were before the acquisition. We haven’t officially split off into Intercon being the guard side. We have an existing management structure so at the senior level no decision has been made on that.

CSM: Does ADT appear to be supportive of the technical team you have built at Intercon? Does there appear to be continued support to develop that kind of talent?

Van Schepen: Absolutely. Those guys are part of the core strength we have and without those guys you can’t compete in that market. We pride ourselves on having been a little ahead of the curve by hiring guys with IP smarts and networking smarts and those guys are in almost all of the large projects we do now. ADT certainly recognizes that is the way of the future and if anything we will need to look at growing that group, not shrinking it.

Van Schepen: Yes. We’re looking at all the real estate in the U.S. and Canada that has come in through this acquisition. We have a pretty small space in Calgary and they have a large space there so we may be able to relocate into their premises and reduce some space there. In Mississauga they don’t have the capability to take in even a fraction of what we have here.

Our central station is housed here and that’s not something you can uproot very easily. We’re on the subway line, which from the guard side is very advantageous for us. Broadly what they are looking at is if there are ways to reduce space without impacting the business they will do that.
 
CSM: There are groups of guards that fall under unions, why do you think Intercon has been able to avoid that?

Van Schepen: I think we treat our people very well. We’ve been very fair ”“ our benefit packages are very competitive. If an employee has issues we have open channels for them to voice those to without feeling they will inspire the wrath of anyone. The relationship we have with our staff is very healthy. There have been attempts with the SEIU (Service Employees International Union) as they were targeting First Service for a while and looking at Intercon and had done some fairly unscrupulous things at some of our sites. Our guards know it’s against their standing orders to even engage in a discussion with someone so they would say, Look I can’t talk to you. People would follow them home; we had people stealing logbooks from sites.  We don’t have a big anti-union posturing here at all ”“ the employees have never shown a real need or desire to go that way.

CSM: What would be your starting wage?

Van Schepen: It varies. In Calgary the starting wages are now north of $16 whereas here they are probably more $11 to $12 and Vancouver a little higher than that. We offer a lot of training courses and the employees can move themselves up to a higher grade and make more money. We encourage them to do that. The courses are free and they can move themselves up the pay band.

CSM: Do you think the legislation regulating the private security industry is going to improve anything in the industry?

Van Schepen: It’s hard to say. For a company like ours I don’t think it will change much because I think we already operate above the standard we’re looking to set. There are always some companies or employees at the lower end of the market that it will perhaps help weed out. I don’t think there will be a huge changeable benefit, certainly not to us. We may see some companies with in-house guards deciding to outsource which is good for anyone in the business.

CSM: What about the market situation we’re in now. In your conversations with counterparts in the U.S. do you have a feeling the market will be strong ”“ will we be affected by what’s going on in the U.S.?

Van Schepen: The spending in the states has dropped and we’d be naïve to think it’s not going to impact us at all here. A lot of the clients we’re dealing with would be less likely to be impacted by that. We’re doing a lot of work in the oil sands and oil is still hovering around $100 a barrel and those guys aren’t going to slow down.

CSM: What new services are you offering clients these days to increase business?

Van Schepen: Something I think we’re doing that is really leading edge include the live video monitoring and video patrol tours. We’re actually managing access for a couple of large clients remotely where our people are watching the camera and letting people in or not based on what they see.

CSM: Is that at a commercial facility?

Van Schepen: Yes. One of the things ADT was pleasantly surprised at when they came up and looked at Intercon was our monitoring centres. We offer much more tailored security solutions than just vanilla monitoring. I think there is some synergy that can happen as we roll it out to their client base and as they look at it more in the U.S.

CSM: What kind of client does that service appeal to most?

Van Schepen: It appeals to highly-secured commercial locations. On the video image retrieval we’re doing that for financial institutions so when they are doing fraud investigations that is all coming through our central stations. We’ve done some live monitoring looking for ATM skimming fraud where we have had people watching 24/7 three or four branches and had some pretty good success. It can also be applied at utilities, transportation, and those sorts of places. There’s still card access control but there’s also visual on top of that.

CSM: Is Intercon interested in going after business from the 2010 Vancouver Olympics?

Van Schepen: We have never gone after the one-shot deals like that. Whether it is SARS Stock or the Pope visiting, it really doesn’t line up well with how we run our business. We won’t leave our client base unprotected to go after a few quick dollars on a one-off event.

Certainly, with the labour market in Vancouver being as tight as it, is we have told them we aren’t interested in providing guards for that at all. We’re more interested on the systems side, but they seem to be taking a slow approach to doing anything on that. We’re expecting a whole wave of requirements will be issued closer to the Olympics for electronic security. On the guard side they have made it very clear they have some plan to take the guards from the local companies. We’re doing some things with the employment terms with our people to prevent them from working for us and doing that on the side without fully disclosing it to us. We wouldn’t put any of our clients at risk due to lack of coverage for a one-time thing like that. They are going to need to throw the net out a bit wider to fill that.