Private equity firm acquires DTT Surveillance

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Monday, March 26, 2012

BOSTON—BV Investment Partners, a private equity firm based here, is the new owner of DTT Surveillance, a provider of managed surveillance and business intelligence to the restaurant and hospitality industries, following a recapitalization announced March 15. The deal includes a $40 million credit from Capiltal One Bank.

“We recapitalized the debt and some of the equity,” Marco Ferrari, co-founder and principal at BV, told Security Systems News. “We now own a controlling stake.”

John Robuck, senior director at Capital One Bank, told SSN that the $40 million is a five-year revolving line of credit. "We are excited to partner with the company as it builds on its prior success of helping the restaurant industry reduce theft and manage customer productivity," he said in an email interview. "Using our team's deep industry experience, we created a unique financing solution for DTT Surveillance to help the company fund its working capital needs and continue to execute its growth strategy.”

The $40 million revolver represents a $20 million increase over DTT's former credit line.

Sam Naficy, CEO and president of DTT, called the recapitalization “a very favorable transaction for the video managed services space,” noting that previously some managed-video services players had trouble getting deals done.

DTT, whose customers include McDonald’s, Subway, Dairy Queen, Burger King, Dunkin Brands and YUM Brands, was ranked No. 1,491 on the 2011 Inc. 500/5,000 “fastest-growing companies” list. According to that listing, DTT had 2010 revenue of $14.3 million. Naficy would not disclose DTT's 2011 revenue, except to say it was “significantly higher than 2010.”

Naficy remains a “significant shareholder” in DTT. Post Capital Partners and Gemini Investors have a minority ownership in the company. Post and Gemini led a $7 million investment in the summer of 2009. It was DTT’s first institutional financing and was done in partnership with Naficy. “[This recap] provides partial liquidity for Post and Gemini,” explained Michael Pfeffer, co-founder and managing director of Post Capital.

DTT is the only investment in the security industry that Post Capital Partners has made thus far. Pfeffer said Post would like to make other investments in the security industry, but “we haven’t found one that’s compelling enough yet.”  Post invests in service-type businesses with recurring revenue.

DTT is also the first pure-play, security-industry investment for BV Investment, Ferrari said. The firm has invested in the communications space since 1983, having done “15 different cable deals … a lot of telecom, CLEC, RLEC, wireless and towers,” he said. One current investment, EnTouch Systems of Houston, and one former investment, Vision Communications, both offer security services.

Ferrari said BV has spent the past three years looking at the security space. “We find it attractive from an equity perspective [with RMR] and low churn compared to the cable space,” he said.

Naficy said he intends to grow DTT “significantly but methodically.” Soon, he’ll be adding to his sales staff. He also mentioned a move into other verticals, something he has talked about in the past.

DTT is “starting to touch retail and convenience stores and now … with new capital we may jump in a little more seriously into one of those,” Naficy said. The reason the company hasn’t strayed too far from QSR yet is that “the [restaurant] space is so hot for us … we have less than 4 percent penetration in our own sweet spot.”

BV’s Ferrari, Louis Bertocci and Vik Raina have joined DTT’s board of directors. The Edmonds Group acted as M&A and financial adviser to BV in the deal.