Monday, June 22, 2009

Security giant G4S buys MJM Investigations


RALEIGH - United Kingdom-based G4S plc, a security colossus on both sides of the Atlantic, has acquired Raleigh's MJM Investigations to gain a foothold in the lucrative field of insurance fraud investigations.

Terms of the deal, which wrapped up in April under a veil of secrecy not uncommon to the industry, were not disclosed. However, local business brokers with knowledge of MJM, which has 374 employees and field offices in California and Australia, estimate the sale price at somewhere between $20 million and $30 million.

Michael J. Malone, MJM's founder, said through a company spokeswoman that he didn't want to comment on the deal. "It's been kind of quiet, and he just doesn't want to speak about it," says Malone assistant Jenna Thompson.

In a news release, G4S, which is a publicly traded company on the London Stock Exchange with a work force of a half-million and annual revenue in 2007 of $8.8 billion, says Malone "will join the G4S group."

With a $30,000 loan from his mother, Malone founded MJM in 1989 at the age of 26 and in relative short order found a niche: uncovering insurance cheats for the companies that wrote their policies. The firm cut its teeth by performing such feats as photographing a workers' compensation claimant as he sprinted around a baseball diamond on a supposedly bad leg and unraveling bogus auto accident claims.

By the 2003-2006 period, Malone could claim that his company was in a "hyper-growth" period, with an expanding employee roster and national ambitions. In an interview around that time, he estimated that 2006 revenue would be in the $50 million range.

In its release, G4S put MJM's 2007 sales at about $45 million and the value of the firm's tangible assets at $16.2 million.

Formed by the merger of two major European security firms in 2004, G4S, among other things, manages billions in cash for British commercial banks, runs nine juvenile and adult "custody facilities" in the U.K. and U.S., and does risk management consulting for a wide variety of clients. The company also provides on-site security for the Kennedy Space Center; a NASA research facility in California; the Wimbledon tennis championships in London; various airports, including those in Oslo and London; and political parties and events.

G4S has grown by acquisition to date. Its top U.S. holding is Florida-based Wackenhut, a nationwide security firm that continues to operate under its pre-merger name.

With the MJM acquisition, G4S is adding insurance fraud to its already hefty catalog of business lines. As MJM's growth curve suggests, insurance-fraud investigations could be a lucrative sector.

The Washington, D.C.-based Coalition Against Insurance Fraud estimates that, in the U.S. alone, fraudulent claims in all varieties of policy types - workers' compensation, auto, fire, health and general property damage - annually hit $80 billion.

"And that is a conservative estimate," says the organization's spokesman, James Quiggle.

Robert H. Perry, a Greensboro business broker in the secuity guard and electronic security industry, says G4S, through acquisition, is on a mission to become a "one-stop shop" for its international clients.

"They want to become the total package," says Perry, adding that he's not surprised MJM was a target. "For a North Carolina-based company with $44 million in revenue doing business around the world, this really was a company with bragging rights."


Reporter e-mail: lweisbecker@bizjournals.com.

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