Specialty Security Services Company
This acquisition involved the purchase of a specialty security services company operating in a three-state region across the Midwest. The company specialized in providing private security personnel for corporate campuses, medical facilities, logistics yards, and municipal events. With a roster of over 85 full-time W-2 guards, 17 part-time floaters, and an administrative staff of six, the company generated $6.8 million in annual revenue with approximately $1.02 million in adjusted EBITDA. Its contracts included multi-year agreements with seven regional hospitals, two city governments, three national logistics firms, and various one-off event clients. The acquisition was structured using SBA 7(a) financing, seller financing secured by contract performance, and a detailed post-close earnout that compensated the seller for maintaining account continuity.
The seller, a military veteran who built the business over 18 years, had developed a proprietary training protocol and operated one of the few regionally licensed security training centers. He held multiple certifications in firearms, de-escalation, and state-mandated security officer licensing, which allowed the company to train and certify its own recruits under agency authorization. The business operated under a state private patrol operator license, requiring designated qualifying agents and compliance filings annually. The seller had personally maintained those designations and agreed to remain as a qualifying agent for up to 24 months post-close while the buyer worked with legal counsel to transition credentials and supervisory personnel.
The purchase price was $4.25 million, reflecting a 4.17x multiple of trailing adjusted EBITDA. The buyer contributed $425,000 in equity (10%), obtained a $3.187 million SBA 7(a) loan (75%), and entered into a seller financing arrangement for $637,500 (15%) with a built-in performance clause. This seller note would be reduced proportionally if revenue from any of the top 10 contracts (constituting 72% of annual revenue) fell by more than 15% during the first 180 days post-close, unless the revenue loss was tied to force majeure or terminated due to buyer negligence.
To further de-risk the transition, the buyer negotiated an earnout structure that tied $250,000 of the total consideration to 12-month trailing revenue retention across all major clients. Specifically, if revenue from the top 10 accounts equaled or exceeded 95% of the trailing average, the full $250,000 would be released in two tranches at month 6 and month 12. If revenue fell below that threshold, the earnout would be reduced on a sliding scale down to zero at an 80% threshold. This structure helped the buyer mitigate risk in an industry where client transitions can be sensitive and where a single point of contact such as a facilities director can determine vendor continuity.
All guards were W-2 employees and assigned to fixed posts, which enabled more consistent service quality and lower turnover. Pay ranged from $17 to $28 per hour depending on experience, clearance level, and shift timing. Guards working federal subcontractor sites received prevailing wage, and the company was fully compliant with state labor laws, including overtime, break compliance, and mandatory rest periods. The average guard tenure was 3.4 years, and over 60% of the staff had been with the company for more than two years. Scheduling and time tracking were managed using Officer Reports, an industry-specific software platform integrated with ADP for payroll processing.
The company’s core competitive advantage was twofold: deep training capabilities and a strong reputation for reliability and incident response. The in-house training academy served both internal employees and external license candidates, generating over $120,000 in annual course revenue. This also created a recruiting pipeline of pre-vetted, pre-certified officers who could be deployed rapidly as new contracts came online. The training facility, located within the company’s leased headquarters, included a mock patrol site, classroom space, and simulation equipment for crisis management drills.
The buyer identified key opportunities for margin improvement through scheduling optimization, supervisor-to-guard ratio realignment, and centralization of customer communications. The company had grown rapidly but had not adopted centralized KPI tracking or margin forecasting tools. The buyer implemented a weekly margin tracker tied to post assignments, labor cost per contract, and incident frequency, allowing them to make data-driven decisions on contract renewals and post staffing. Within three months, gross margin increased from 34% to 38% as two low-margin contracts were renegotiated and overtime costs were curtailed through tighter shift management.
Operationally, the company was managed by a general manager, three area supervisors, and a compliance officer who oversaw licensing and training records. The buyer retained all personnel and added a COO with experience in multi-state facility operations. To address succession planning, the buyer initiated a plan to designate two existing supervisors as future qualifying agents and enrolled them in the necessary licensing coursework. This transition plan was embedded in the legal documents, with the seller contractually agreeing to assist with this transition and remain on as the qualifying agent until both designates were licensed and approved by the state regulatory board.
From a systems perspective, the company had been under-leveraged. It used a legacy CRM for client communications and maintained training logs in spreadsheets. Within the first 60 days post-close, the buyer migrated the entire customer relationship and guard deployment system into a more robust ERP platform customized for security firms. This included GPS-enabled shift check-in/check-out, incident reporting automation, and site-specific SOP digitization. Clients were given access to a customer portal where they could view post logs, incident histories, and monthly summaries, which significantly improved client stickiness and perceived professionalism.
Client reactions to the transition were generally positive. The seller worked closely with the buyer to introduce them at key client meetings and assisted with RFP responses during the first 90 days. This helped maintain continuity and reinforced the company's commitment to quality. Additionally, the buyer launched a new employee bonus program tied to contract performance and client feedback, distributing $17,500 in bonuses during the first quarter to guards who maintained perfect attendance and positive client feedback.
Legal diligence focused on state regulatory compliance, license transferability, and labor classification. The company had clean standing with all state regulatory agencies and had never been subject to fines or labor claims. Insurance coverage included $5 million in general liability, $3 million in errors and omissions, and a dedicated cyber policy to protect against client data breaches. These were all reviewed and assumed by the buyer, with new policies bound at close.
Real estate was not included in the transaction. The seller’s headquarters building was leased at $6,500 per month on a triple-net basis. The buyer signed a new five-year lease with two renewal options, with a right of first refusal should the seller decide to sell the property. A separate equipment lease for training facility simulation tools was assigned to the buyer and included in the monthly cost model.
Within six months post-close, the company retained 100% of its top 10 clients, added two new commercial office building contracts worth $440,000 annually, and improved average post profitability by 4%. EBITDA grew to an annualized $1.18 million, and the seller became eligible for the full earnout payout. The buyer began exploring expansion into armed security and mobile patrol services, as well as acquiring a smaller competitor in an adjacent metro area.
This transaction exemplifies the acquisition of a compliance-heavy, regulated service business with embedded institutional clients and skilled labor dependencies. Through the use of SBA financing, seller-backed risk-sharing mechanisms, and structured employment transition plans, the buyer was able to de-risk the transaction, ensure continuity, and create a platform for further roll-up activity in the security services industry.
