Security services firm Altegrity has agreed to buy rival Kroll from Marsh & McLennan (MMC) for $1.13 billion. Kroll had been in an auction since February and attracted tier-one private equity operators like the Carlyle Group and General Atlantic.
With a fairly stable business, financing was likely straightforward for the Kroll transaction. The funders include Goldman Sachs (GS) and Apollo Investment Corp.
Circling Back to Kroll
Michael Cherkasky has had an amazing career. He was an Assistant District Attorney in New York County and led the investigation against crime boss John Gotti. He then became the CEO of Kroll, a top investigation services firm. But four years after Marsh & McLennan bought the company, he moved over to Altegrity. The merger will bring Cherkasky back to Kroll.
The "Private Eye" of Wall Street
Jules Kroll started Kroll back in 1972. However, the business did not get much traction until the 1980s when Kroll provided investigative help on corporate takeovers. In fact, the firm became known as Wall Street's "private eye."
Then Kroll expanded its platform into other categories, such as forensic accounting, background screening, drug testing and data recovery. The firm also engaged in a variety of high-profile assignments. For example, the U.S. House of Representatives Foreign Affairs Committee hired Kroll to investigate Philippine President Ferndinand Marcos and his wife Imelda regarding corruption. The firm learned that the couple had nearly a billion dollars worth of real estate in Manhattan.
By 2004, Kroll decided to sell to MMC for $1.9 billion. Unfortunately, the deal really turned out to be a distraction -- the write-downs have amounted to over $800 million so far.
Next Steps for Altegrity
Back in 2007, private equity firm Providence Equity Partners purchased Altegrity for $1.5 billion and has continued to invest in the firm. Some of its holdings include USIS, HireRight, Explore Information Services, and Altegrity Risk International.
Currently, Altegrity has 8,000 employees across the globe and is actually the largest commercial provider of background investigations for the government. Given its focus and scale, Altegrity is likely to benefit nicely from Kroll, which has offices in over 27 countries and more than 3,000 employees.
Of course, Cherkasky's prior experience with Kroll will also be a big help, especially with the integration. And yes, it would not be surprising if he took Altegrity public at some point.
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