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Risky Business: Universal Protection Service Acquiring Guardsmark

July 16, 2015

Universal Protection Service (UPS), the fourth-largest security contractor in the U.S. and the biggest obstacle to Silicon Valley security officers’ efforts to raise up their community, is expected to acquire another national security contractor, Guardsmark LLC.

The news broke last week, when a credit rating agency, Moody’s Investors Service, announced its assessments of the company and the loans that Universal will need to take in order to buy Guardsmark.

And how did they fare? Not very well. Moody’s considers portions of this investment to be “speculative,” “high risk,” and in “poor standing.” The report went on to discuss the huge amount of debt required to finance Universal’s recent acquisition binge, noting that “Moody’s estimates that Universal’s leverage, pro forma for all recent acquisitions (including Guardsmark), will be high, at well above 7 times debt to EBITDA.”

UPS’ credit score isn’t its only thing in poor standing.

Silicon Valley security officers working for UPS are living their own high-risk existence, struggling just to get by. Officers have stepped forward with multiple claims of stolen wages, crowded living conditions, homes in disrepair, going years without a raise, and retaliation for speaking out.

The largest pension fund in the U.S., the California Public Employees’ Retirement System (CalPERS), is looking into concerns raised by security officers that UPS may not be in compliance with the pension fund’s responsible contracting policy.

Previous experiences with UPS’ acquisition and integration of other security services contractors, suggest that more attention may be required. In 2012, UPS acquired several smaller security companies employing far fewer officers than Guardsmark, including Heritage Security in San Diego, which held several public and transit security contracts. UPS’ performance and training problems became the focus of audits, an OSHA investigation and a spate of negative press. The company bore additional costs, faced a restructured contract, and lost a contract with San Diego County worth as much as $15 million.

Hopefully Universal’s financial backers, Warburg Pincus and Partners Group, will steer both UPS and its workers out of this risky situation. We know it is possible for the company to work productively with security officers, to the benefit of all involved. UPS cut its Los Angeles turnover rate in half by working with SEIU USWW to keep experienced officers on the job. As wages and working conditions improved with the L.A. officers’ first union contract, turnover fell each year, dropping from 79 to 39 percent in four years.