International -- European Business: ANTITERRORISM
GUMSHOES FOR THE GLOBAL ECONOMY (int'l edition)
Kroll O'Gara is aiming to be a one-stop security outfit
In southwestern Moscow, closed-circuit television monitors stand sentinel outside the headquarters of Gazprom, the world's biggest natural gas company. Half a world away in Sao Paulo, a Brazilian executive drives to an appointment in a Chevrolet Suburban four-by-four armored against bullets or blasts. Meanwhile, in Mexico City, an American trader receives a confidential background report on a potential Mexican business partner.
Scenes from a Hollywood spy movie? Not quite. The surveillance gear, armored car, and detective work are all the doings of a small firm headquartered in an industrial park outside Cincinnati. But the firm, until recently called O'Gara Co., is fast becoming better known. In August, 39-year-old Wilfred "Bill" and Tom O'Gara, 47, the brothers who headed the firm, acquired famed New York gumshoe agency Kroll & Associates for $89 million in stock and assumption of $11 million in debt.
Overnight, the merger about doubled O'Gara's global outposts to 38, its workforce to about 1,000, and its sales to $188 million. The strategy, says Jules Kroll, a feisty former New York City prosecutor who is chairman and chief executive of the new Kroll O'Gara Associates, is to combine Kroll's investigative acumen with O'Gara's security hardware savvy (table). O'Gara has expertise assembling global positioning systems--which track the location of people or vehicles by satellite--and surveillance cameras, along with armor-plating vehicles. Kroll is known for financial probes of Philippine dictator Ferdinand Marcos, "Baby Doc" Duvalier of Haiti, and insider trading on Wall Street.
The challenge is putting together a global, all-services security firm before larger, better-known rivals do. Although Brinks, Borg-Warner, and Wackenhut are trying to branch into other areas, they still tend to specialize in one aspect of the security business. By providing one-stop shopping, Kroll O'Gara hopes to become a leading player in an industry that Kroll values at $100 billion in annual sales. "We have a real chance to consolidate this industry," he says in his midtown Manhattan office.
Kroll O'Gara's fastest-growing markets are Russia, Latin America, and Southeast Asia. O'Gara and Kroll both have a strong presence in Latin America. They are especially active in Brazil, where O'Gara has a factory to armor vehicles, and in Mexico, where O'Gara bought a small local security firm called Palmer Associates last year.
SHIRTSLEEVES. Both also have a presence in Russia, notably in Moscow, where contract killings have soared in the past few years. In 1992, Kroll was hired by the government of Prime Minister Yegor T. Gaidar to track down some $8 billion hustled out of the country by managers of former state-owned companies. Kroll says his investigators found the money in Cyprus and Monte Carlo, among other havens. O'Gara, meanwhile, has sold about two dozen armored vehicles in Russia since 1995, especially customized Grand Cherokees.
Of all the potential markets, Asia may prove the most promising over the long term. Kroll sees great potential for hardware sales in India, Indonesia, and the Philippines, where big investors, typically Japanese or overseas Chinese, are often targeted for violence.
Even with full-service security, however, Kroll O'Gara faces formidable competition. In Europe, Daimler Benz armor-plates limousines. In Latin America, London-based Control Risk International offers complete service for kidnapped executives. And Russia has scores of new security companies made up of former KGB and military officials.
Nevertheless, investors seem bullish on the merger. When O'Gara went public last November, the stock opened at 9. After the Kroll deal, it went to 15 and now trades at 17. Meanwhile, Kroll hints that further acquisitions are in the new company's future, perhaps in security for phones or computers.
How will the streetwise, 56-year-old New Yorker get along with the boys from Fairfield, Ohio? Tom O'Gara courted Kroll for months, and Kroll says he feels good about O'Gara. "In their own way, these are both shirtsleeve companies," he says. And both are keen to dominate a high-risk business.By Peter Galuszka in Cleveland, with Joan Warner in New York, Carol Matlack in Moscow, and bureau reportsReturn to top