Background

When Simon Havers and James Benfield from Granville Baird asked us in September to carry out commercial due diligence in the business services sector, we expected the target to be just another company in the business of staffing, contracting and outsourcing. ArmorGroup is concerned with all three, but an ordinary operation it is not.

ArmorGroup provides training in vehicle and weapon handling, but its core business is premium security services, with operations in 38 countries. The word 'premium' is the give-away. What this means is that ArmorGroup operates in parts of the world it describes as 'high fright'. It is no accident that the bulk of the people and assets it is guarding are in Africa, South America, the former Soviet Union, Afghanistan and Iraq.

Approach

It was clear from the start that a central concern would be ArmorGroup's ethical position. Neither equity nor debt providers would get involved with a company that was anything less than squeaky clean. Interviews with customers and others soon made it clear that ArmorGroup is a business run to the highest ethical standards. 'Simply the best' and 'trustworthy and reliable' were two of the sentiments expressed by those in the know, themselves typically ex-intelligence officers with the means of thoroughly checking out their suppliers.

Not that these interviews were particularly easy. For a start, there was an inbuilt suspicion on the part of the managers we interviewed (hardly surprising given their roles). The other difficulty was getting hold of them. You try talking to the person in charge of security for an oil major on Sakhalin Island, which is in the remote northeast corner of Siberia and has an eleven-hour time difference (we got him on his mobile in the end).

With the ethical position beyond question, the next step was to understand the business. Customer interviews had already given some valuable clues to its quality. ArmorGroup would not be used for routine guarding in safe environments. On the other hand, if the need was to protect engineers from bandits and terrorists in a remote part of Southern Iraq or to ensure that your aeroplanes are not unwittingly used to ferry narcotics into America, then ArmorGroup is the only choice. Others claim to be able to do the same, but ArmorGroup is the only company able to handle the big, complex, projects in dangerous places.

Two to three year contracts are the norm in this business and the major aim of the interviews was to understand, customer by customer, contract by contract and year by year, the value of each one.

Telephone interviews are all very well, but there is no substitute for talking to people face to face. AMR and Granville Baird paid a joint visit to the US State Department, which also took in the ArmorGroup driver and weapons-handling training centre. Uganda is fairly typical of a mature operation; Granville Baird volunteered for that one. "Now, what about Iraq?" said Simon. "Sadly our company policy means we can't go," he continued looking at me in a manner which made it pretty clear what the response should be.

AMR prides itself on getting the answer so the next thing I knew I was aboard an RAF Hercules transport plane (the only way to get from Kuwait to Baghdad) thankful that I had not eaten breakfast that morning as the pilot took the normal evasive action on coming in to land. Despite its dangers, the trip was well worthwhile. It brought home how important ArmorGroup is to the rebuilding operations over there and, more importantly, just how well ArmorGroup has positioned itself to grow a business which will prosper long after the present hostilities are over.

Result

Granville Baird completed the deal at the end of November.

"AMR performed above and beyond the call of duty, not just in visiting Iraq but in getting down to the detail on ArmorGroup's contracts" James Benfield, Granville Baird