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Protectron sells, leases, installs, monitors and maintains alarm systems for residential and commercial subscribers and provides third-party monitoring services for smaller alarm installers. Protectron markets its alarm systems through a corporate sales force and a network of authorized agents and dealers. The company operates monitoring stations in Montreal, Quebec City and Ottawa. Protectron is the third largest security alarm company in Canada and the leading such firm in Quebec. In May 2001, Wellspring sponsored a management-led buyout of the company from Quebecor Media Inc, to participate in the organic growth of the industry and to boost its own profitability. As a small division of a multi-billion dollar parent, Protectron was constrained from expanding beyond its home region and offering other monitoring services. Since becoming independent, the company’s management became free to pursue new avenues of growth. The company also had the opportunity to purchase several competing alarm companies at reasonable prices. Protectron possessed a strong integration track record, having consolidated 60 companies and 19,000 subscribers into the company’s existing three call centers over the prior four years.

Protectron displayed many of the key investment characteristics sought by Wellspring. First, the company participated in an industry with favorable growth trends — the company estimates the compounded annual growth rate of the Quebec residential market from 1995 to 2000 to have exceeded 8%. This growth is based upon a narrowing of the divergence in residential alarm system penetration rates in the US and Canada, the decreasing costs of new security systems, the aging and increasing wealth of baby boomers and the increasing likelihood of home builders to include security systems in new homes. These same factors partially shield the industry from economic cycles; in fact, the industry managed to grow by more than 5% during the recession years of 1990-1991. Second, Protectron occupies a strong market position with a 19% share of the Quebec residential alarm market. Finally, because of its relationship with management and its ability to act quickly, Wellspring was able to purchase the company for a multiple below industry averages.

"We are very pleased to have partnered with Wellspring. Their investment marks the beginning of an exciting new chapter for Protectron. The solid capital structure put in place by the transaction will allow us to achieve our goals of providing superior customer service while continuing to grow our subscriber base. Wellspring’s M&A experience and their willingness to provide additional capital will be crucial to building long-term value."

Daniel Demers
Chief Executive Office