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> About Nexos > Expertise & Investment History > NSS, Inc. / ADSI, Inc. National Security Service, Inc. (NSS)/Automatic Detection Systems, Inc. (ADSI) Birmingham, AL / Montgomery, AL / Raleigh, NC www.adt.com In 1994, the Management Team began to pursue acquisitions in the alarm monitoring industry. The industry was characterized by high fragmentation (13,000 companies) and relatively high growth (projected 8%), as well as very stable, high margin revenue streams from monitoring contracts. Automatic Detection Systems, Inc. ("ADSI"), based in Birmingham, Alabama, with over 6,500 customers at the time it was acquired, had been in business for over 25 years. The intent was to use ADSI as its "platform" vehicle in the industry from which a much larger regional company would be developed. In May 1995, ADSI acquired the stock of National Security Consultants, Inc. ("NSC"), a Montgomery, Alabama based Security Company. The acquisition was especially attractive because ADSI was able to close NSCs monitoring station and to transfer all alarm monitoring and most administrative functions to ADSIs Birmingham office. The cost savings resulting from these measures accrued directly to ADSI. In March 1996, management closed the acquisition of National Security Service, Inc. ("NSS"), the largest independent alarm company in North Carolina, and the combined entity ranked among the top 20 security monitoring companies in the United States. In October of 1996, Entergy, a large utility company, acquired NSS/ADSI for 47 times recurring revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment Opportunity In the early 1990s, the security alarm industry represented an excellent opportunity to acquire companies as the industry was highly fragmented and possessed both substantial growth potential as well as stable and predictable recurring revenue streams. In 1993, the overall security alarm industry had revenues in excess of $11 billion with annual growth averaging 9% since 1988, despite only 10% residential alarm penetration. Additionally, the industry was represented by 13,000 companies and was consolidating rapidly. Business Description In the mid-1990s, three Southeastern security alarm businesses with operations in Alabama and North Carolina were acquired in order to take advantage of the consolidation and internal growth opportunities in the industry. By 1996, ADSI was ranked among the top twenty alarm companies nationwide, generating in excess of $850,000 in monthly recurring revenue through the installation, servicing and monitoring of residential and commercial burglary and fire alarm systems. Transaction Description In December 1994, Automatic Detection Systems, Inc. was acquired through the contribution of approximately $4.8 million in the form of $1.8 million in common equity and $3.0 million in subordinated debt. A $9.8 million term loan and revolving credit facility was arranged with Bank of Boston, of which $4.6 million was designated as a line of credit for future acquisitions and internal growth. In May 1995, 280 Security Holdings, Inc. ADSI made its first add-on acquisition in the alarm monitoring industry by purchasing National Security Consultants, Inc. An additional $1.2 million in the form of $0.5 million in common equity and $0.7 million in subordinated debt was contributed to complete the acquisition. An increase in the term loan with Bank of Boston completed the financing for this transaction. In March 1996, 280 Security Holdings, Inc. ADSI acquired National Security Service, Inc. for a transaction value of $17.5 million. The credit facility with Bank of Boston assisted in funding this acquisition. In October of 1996, Entergy, a large utility company, acquired NSS/ADSI for 47 times recurring revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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