Survey - Corporate Security: The Top Players in Intelligence Industry
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Survey - Corporate Security: The Top Players in Intelligence Industry
Published By: Financial Times
Andrew Edgecliffe-Johnson
April 10, 2001


Highlights of the Article:

(...) SMITH BRANDON INTERNATIONAL

One of a growing group of small specialist firms with strong governmental connections, this Washington-based group was founded by Harry 'Skip' Brandon, a former FBI chief of counter-terrorism, and Gene Smith, a former prosecutor.

Through an international network of contacts in the intelligence, business and diplomatic communities, Smith Brandon aims to provide political analysis and business intelligence of a quality that stands up to judicial scrutiny.

It recently joined four other security consultancies to form the International Security Alliance, seeking to broaden the range of services it can provide, particularly to clients in the extractive industries. (...)

For the full article see below.




Survey - Corporate Security: The top players in intelligence industry: Industry Leaders by Andrew Edgecliffe-Johnson: The expanding corporate security industry, like other business sectors, is getting increasingly involved in mergers and acquisitions

The tradition of discretion that pervades the corporate security industry has meant that many clients know little about the different players in the business. The dynamic trend of consolida tion has only made the picture more confusing.

Customers are becoming more sophisticated in their use of security advisers and a few independent consultants have emerged to counsel clients on which firms to use for different kinds of assignment. However, to many the industry remains a mystery.

Fittingly, perhaps, most executives and clients of the corporate security industry are reluctant to talk publicly, but the following is a series of sketches of the leading players, compiled from interviews with those who know the industry best.

* KROLL

The industry leader has not had an easy year. Its 1997 merger with O'Gara, an armoured car manufacturer, ended in boardroom squabbling.

During its protracted corporate divorce, an attempt to take the company private with Blackstone Capital Partners fell through last April.

Jules Kroll, chairman - who, in 1972, founded the group and, many would say, the industry - says: "The last year and a half, in terms of intramural activity, has not been fun."

However, Kroll has shown a remarkable ability to bounce back from past knocks, and the beginnings of a fight-back are visible.

Mike Chercasky, Kroll's president, aims to double revenues in the next three years. He says that Kroll's investigative and intelligence revenues, at roughly Dollars 200m a year, are three times what they were when it struck the O'Gara deal.

Kroll remains the industry's most established name and its largest player. It has continued to make acquisitions, strengthening its background investigations practice and its skills in IT security; it has also recruited new talent to build up its government sector business.

In the first nine months of 2000, sales from Kroll O'Gara's investigative and intelligence group increased 15 per cent to Dollars 151m, but the company's stock suffered last year.

However, its management is eager to improve its current Dollars 125m market value.

* CONTROL RISKS GROUP

The Control Risks name is still a byword for kidnap and ransom advice and gung-ho adventures in high-risk countries, but the group has moved effectively into Kroll's traditional business intelligence territory.

Founded in 1975 and bought out by a management team in 1981, it added an investigative division in 1995. In the past six months, it has begun a long-awaited expansion in the US, recruiting several PricewaterhouseCoopers veterans to open a Los Angeles office, and launching IT security and forensic investigations practices. It plans to increase US revenues threefold by 2004.

The group's strengths include political risk analysis, investigations and crisis management. With about 360 employees, it has worked for 91 of the Fortune 100 companies and advised on more than 1,000 kidnap and extortion cases.

Control Risks has played its part in the industry's consolidation, buying Network International, a UK firm with strong forensic capabilities.

The group's revenues were about Dollars 50m last year, of which Dollars 8m-Dollars 10m came from the US.

* ARMOR HOLDINGS

Originally a manufacturer of law enforcement equipment, Armor has built a sizeable consultancy division - ArmorGroup - in the past four years, largely by acquisition.

Publicly-quoted since 1999, Armor has a market value of about Dollars 380m, and reported a 41 per cent rise in revenues for 2000 to Dollars 221m, coupled with a 20 per cent rise in net income to Dollars 17m. Revenues from the services business rose 42 per cent to Dollars 85.6m, or 39 per cent of the total.

Chief executive Jonathan Spiller's strategy of buying boutiques has brought in some strong talent. Asmara is one of London's most respected business intelligence firms, DSL brought skills in international man guarding, and CDR gave Armor a good intellectual property constituency.

However, Armor has been criticised for having been slow to integrate these companies. The process of integration has now begun in earnest, with Amy Lashinsky of Asmara playing a key role.

However, rivals question whether more upheaval is in store, as earn-out agreements struck with some of the acquired companies' founders begin to expire.

* DECISION STRATEGIES FAIRFAX INTERNATIONAL

Bart Schwartz, a Kroll veteran and former federal prosecutor, founded Decision Strategies in New York in 1991 and merged it six years later with Fairfax International, a Virginia-based group established in 1983 by Mike Hershman, a senior government investigator.

DSFX, which is said to be about the same size as Control Risks' investigative business, has a strong reputation for due diligence, business intelligence and fraud investigations.

In February, DSFX was bought by SPX Corporation, a US-listed conglomerate with a security services arm. Industry insiders say DSFX, which also talked to Pinkerton and PwC, hopes to take advantage of SPX's capital to make acquisitions and attract new talent.

Meanwhile, DSFX has been growing organically. It has expanded its computer forensics practice in the US and its presence in Europe under Dan Nardello, a former assistant US attorney in the southern district of New York.

Mr Nardello, whose experience includes fraud and organised crime investigations, made the unusual decision to open a European headquarters in Rome, but has since moved to London, where DSFX is now very much in business.

* RISK ADVISORY GROUP

Risk Advisory Group (RAG) was founded in 1997 by a group of defectors from Kroll, including Arish Turle, a former member of the Special Air Service, and Bill Waite, a one-time case controller at the Serious Fraud Office. It established itself quickly after a bumpy first year and is said to have been profitable since its fifth quarter.

Rivals are watching carefully to see whether that early momentum can be sustained.

Six months ago, one of its founders - David Crichton-Miller, a former McKinsey consultant - left after apparent strategic differences.

RAG's recent investment in employee screening work has also prompted questions over whether its focus might move away from investigative and intelligence activities.

However, the group has worked on about 20 hostile takeovers since its inception and is building a list of public sector clients to add to the 14 of the top 20 investment banks and 19 of the FTSE-100's members which it numbers among its clients.

RAG employs more than 80 people in London and Moscow, where its emerging markets practice is recovering from the 1998 Russian devaluation crisis in 1998 under Nicolas Ollivant, whom it recruited from the European Bank for Reconstruction and Development.

* INVESTIGATIVE GROUP INTERNATIONAL

Terry Lenzner, Washington's best known investigator, has traditionally kept a low profile. Last year, however, his firm earned unwelcome headlines when it emerged that, on behalf of Oracle, IGI had gone through the rubbish of groups connected to Microsoft.

Closely linked to former president Bill Clinton's personal legal team, Mr Lenzner specialises in discreet intelligence gathering, fraud cases and reputational work. Despite having about 85 full-time investigators, IGI has yet to gain wide international recognition.

* BISHOP INTERNATIONAL

Founded to investigate commercial claims in the Lloyd's of London insurance market, Bishop International is in the early stages of a transformation under Jeff Katz, a Kroll veteran.

Despite its one-time grip on insurance investigations and past high-profile assignments, such as work on the disappearance of the racehorse, Shergar, Bishop needed an overhaul: Mr Katz has changed its staff, its location and its focus.

He is starting from scratch in his effort to build a competitive business intelligence and corporate investigations consultancy, but observers believe Bishop has a better chance than most new companies of giving established London rivals a run for their money.

* PINKERTON

Founded in 1850, the pioneering detective agency has grown from its Wild West roots to encompass a range of services from uniformed guards to employee screening and investigations. Securitas, the Swedish group which bought Pinkerton in 1999, last year added Burns International, a US guarding group founded in 1909.

Pinkerton now has annual revenue of more than Dollars 2.8bn, and about 475 offices around North America.

* HAKLUYT

Small, but with a high-profile that few can match, Hakluyt was established by two former MI6 members, Christopher James and Mike Reynolds. It has aimed straight for the top of the market, offering hard-won intelligence about the most complex corners of the world.

Operating at the intersection of business and government, Hakluyt's access to the top levels of corporate management stems from its "foundation" - an advisory board composed of eminent figures from British business, such as Sir William Purves, the former chairman of HSBC.

With a strong base of clients in the FTSE-100, Hakluyt has formed a strategic relationship with Kissinger Associates, the US consultancy led by Henry Kissinger, the former US secretary of state.

* SMITH BRANDON INTERNATIONAL

One of a growing group of small specialist firms with strong governmental connections, this Washington-based group was founded by Harry 'Skip' Brandon, a former FBI chief of counter-terrorism, and Gene Smith, a former prosecutor.

Through an international network of contacts in the intelligence, business and diplomatic communities, Smith Brandon aims to provide political analysis and business intelligence of a quality that stands up to judicial scrutiny.

It recently joined four other security consultancies to form the International Security Alliance, seeking to broaden the range of services it can provide, particularly to clients in the extractive industries.

* THE BIG FIVE

Rivals question the large audit firms' long-term commitment to the corporate security market, but all five have built a large presence in this business. All have expanded from their historical base in financial due diligence to offer a broad range of products and services such as high-technology risk consultancy.

Their audit arms' client lists and respected names give them easy access to chief executives, but rivals claim such relationships are fraught with potential conflicts.

Among the prominent members of this group, much speculation has surrounded PricewaterhouseCoopers' intentions. Under Craig Jacobsen, it has built an investigative staff of about 700, but it is said to have sounded out several other corporate security firms about joint ventures or acquisitions.

Its intelligence business was boosted recently by the recruitment of Steve Vickers, the former head of Kroll's Asian operations.

Deloitte & Touche took the unusual step of adding a political risk business last November, hiring Martin Stone from Control Risks. It is known for having a strong IT fraud detection service, and has tried to position itself at the top end of the market.

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