In its largest acquisition to date, Brink’s announced on February 26th its intent to purchase the majority of G4S’s – the global security and cash management company – cash handling business for $860m. With core armored transport and ATM services generating $1.9bn revenue for Brink’s in 2018, this move will increase their divisional revenue potential by 42%, to $2.7bn, and provide access to 14 new markets including the Netherlands, Ireland, Cyprus and Indonesia. The deal comes as G4S looks to focus on its core operations with the exclusion from the agreement of its Retail Cash Solutions business, and cash operations in the UK and South Africa as a signal of this intent.
The acquisition will be Brink’s 14th since March 2017 and follows its $520m purchase of armored transport company Dunbar in May 2018. This continues a decade-long trend of consolidation within the global armored transport industry, with other global players such as Loomis and Prosegur pursuing small-to-medium-sized acquisitions in recent years.
Horizontal acquisitions of this nature can affect the market, both favorably and adversely. Financial institutions and merchants may see improvements in their service, as well as greater efficiencies in their supplier relationships if they previously managed several armored transport contracts. This could also lead to additional bargaining power and opportunities for flexible and enhanced delivery schedules.
On the other hand, consolidation can lead to operational challenges, as firms face headwinds when assimilating their IT infrastructure and business culture – both of which are critical to gain post-integration synergies. Acquisitions can also result in merchants being serviced by a supplier that they have not explicitly chosen to work with, which can cause friction and present additional challenges; these concerns may stem from issues such as quality of service, which frequently deteriorates during acquisition periods. Organizations must therefore ensure that they have sufficient processes in place to satisfy requirements from a new client base and demographic - which is particularly prevalent when entering multiple new markets, as acquirers may have limited operational knowledge to deploy their strategy.
There is also a risk of service costs rising for clients. In new markets, firms may not have the operational and logistical efficiencies from their core markets, and cost increases may trickle down to clients. The acquirer may also decide to offset these short term inefficiencies by increasing the cost of its services to existing clients.
Brink’s and G4S’s deal will be finalized in multiple phases, with the first stage completed in 60 days and the remainder by the end of the year. Given previous case studies, clients of both G4S and Brink’s should monitor their service levels throughout the transition period and ensure there is a smooth handover of their armored services. To learn how CMS Analytics helps retail merchants get the best service from their carriers and streamline escalation and reconciliation processes, visit our website: www.cmsanalytics.com/cmscash.