Independence Day arrives for Allegion

Nearly one year to the day when Ingersoll Rand first announced that it would spin-off its security business, executives from Allegion celebrated the company’s recent debut as an independently traded company as they rang the opening bell at the New York Stock Exchange on Monday. Locksmith Ledger was invited to attend the event, which symbolically marked the beginning of a new chapter in the company’s history under the umbrella of the Allegion brand.

The company, which began trading on the public equity markets last week under the ticker symbol “ALLE,” is also now a part of the S&P 500 stock market index. Allegion sells commercial and residential access control products under 23 different brands including Schlage, CISA, Interflex, LCN and Von Duprin. The company has more than 7,600 employees worldwide and will be headquartered in Ireland, with regional corporate centers in Carmel, Ind., Brussels, Belgium, and Shanghai, China.

LL sat down with Dave Petratis, Allegion’s chairman, president and CEO, as well as Tim Eckersley, the company’s senior vice president and president of the Americas region, at the NYSE on Monday to discuss the impact of the spinoff on their customers, as well as their long-term strategic goals for the company moving forward. 

 

Tell me about the journey to get to where Allegion is at today – becoming an independent company and how far you’ve come since the spinoff was announced last December.

Petratis: A year ago there was a vision on the board of Ingersoll Rand that an independent company could be created. I am a strong advocate that focus in business is good and we are a focused security company with global capabilities and market leaders in many of the markets that we play in. What’s the most gratifying is that in an umbrella of uncertainty – “hey we’re going to be independent, we’re coming out of Ingersoll Rand which was a part of our lives for 25 or 30 years” – an employee survey was done and 78 percent of our employees said that this is a great place to be. We’re excited about the future and I think that’s just a strong testament to how bright it is for Allegion going forward.

Eckersley: It has been amazing actually. I think if you look at the amount of effort that’s required to carve out an organization like this out of a large, public company and the IT systems and the HR systems… it was an enormous amount of work by a lot of people all going on while we were still serving our customers and delivering against our profit plan.

 

What is the impact of this spinoff going to be on your global network of distributors and dealers? What kind of feedback have you received from them thus far?

Petratis: I think our distributor partners see our vision that we have a legacy company that has been a big part of distribution for over a century and our independence, our ability to invest strongly in our company, our products and our people will make a difference in their businesses.

Eckersley: It has been phenomenal. The feedback from our customers has been very positive in the things they’ve spoke about and the focus we now have as a pure security company and the ability to take our $150 million of cash flow every year and invest it in growth opportunities, new products and new capabilities. In terms of the impact, if we do our jobs right and we certainly intend to that, the impact will be zero to our customers other than the potential for new growth opportunities, new products and capabilities that we bring to the marketplace. Obviously, we have a significant presence in the residential space and the same quality that our customers have expected from us over the years will continue.  

 

Were there ever any concerns about potential loss of brand recognition in making this move to become independent of Ingersoll Rand?

Petratis: I don’t see it. Our customers know us by our brands - Schalge, Von Duprin, LCN – its reinforced everyday and every time someone touches one of our products. Ingersoll Rand has been a great partner. Allegion will be an umbrella brand that pulls our brands together, but the strengths of our install base, the pride people have in our brands are a shining star that guides us.

 

 What are some of your immediate goals for the company and what are some of your strategic, long-term plans?

Petratis: One is to grow the business organically and to make smart investments that will help us advance. Second is to understand the needs of our customers in terms of integrated technology, making sure that we’re on the cutting-edge. There’s clearly a convergence going on between mechanical, electrical and software (solutions)… and we want to offer the best in terms of innovation while maintaining the legendary strengths that we have in our mechanical reliability. There’s a reason we’ve stood the test of time. It’s because of the expertise of our people and the expertise of our channel partners.

We have some opportunities to grow geographically. A high priority for us would be Asia, specifically China. We’ve got a nice position there and our focus and independence allow us to grow. Strategically, we’ll continue to invest in and develop our people in a variety of ways. It’s a new day as an independent company, we’ve got to strengthen our capabilities there and improve our quality customer service. What we call “operational excellence” is something that has helped us stand the test of time, but operational excellence in everything we do is a clear platform for the company. We’ll consider acquisitions where they make sense.

Eckersley: We obviously have a strategy in place and there’s a lot of consistency with the strategy as a part of Ingersoll Rand, but now as an independent company there’s a lot of consistency and I think we should be able to accelerate the execution against our strategy, so we feel good about that.

 

What are the benefits of this spinoff to your customers? Are there any immediate changes that they can expect now that this transition has been finalized?

Petratis: I think first and foremost, the great profitability of this company will be reinvested into things that will drive instant improvement. One of the challenges when you’re in a conglomerate is that capital deployment can go to other phases of the business. We, as a focus company, control our destiny today and I think they’ll see it in our people, I think they’ll see it in investments in our systems and in our growth which is a great position to be in.

Eckersley: I think of the term cycle time.  We’re going to be focused a lot on cycle time, not just in our plants, but the cycle time of the business. We’ll be driving a more aggressive agenda; newer products, faster to the marketplace than we’ve been able to do in the past.

 

How did you come up with the concept for the Allegion brand and what has gone into its development?

Eckersley: We were looking for something that would do a couple of things: first of all, we wanted to hold on to our rich legacy and heritage as an innovator in the marketplace and an inventor in categories in the marketplace. We wanted something that spoke to our people and teams, the people that made this company great and we wanted something that spoke to the marketplace about the expertise that we bring to the table. This term Allegion actually has in its roots “all,” as in all together and “legion,” (to symbolize) a legion of experts to help support the marketplace. We had two or three options and this one just hit home right away and it’s really built on those three things: our legacy, the capability and expertise of our people and this expertise that we bring to our customers and the end user markets.

Petratis: I think our symbolism is cool: a legion of people, a legion of experts, a legion of customers, a legion of historic brands that help define our industry.

 

Where do you see opportunities for growth within the access control market?

Petratis: I think number one is around our core products. We’ve got to be able to operate in an open environment. What we do is quite unique in terms of securing people and assets, but the systems in terms of access control that we operate in can be quite diverse.

Eckersley: If you look in the U.S. market, there are more than 70 access control providers – companies like Lenel, CBORD and others – we connect to all those players and we have relationships (with them). We actually sold off a business that was competing against those (companies) and the reason we did that was to gain closer alignment with that diverse marketplace. That gives us the best opportunity in terms of growth. If you think about where the industry is going, one of the biggest and most exciting things I see coming is mobility and how virtual credentials and access control using mobile devices will ultimately converge in the electronics world.

 

If I were an investor, why should I invest in Allegion today?

Petratis: Potential investors should consider the legacy of our brands. We’re brands that have stood for over a century. Second, if you look at the growth and performance of this business in up and down markets, it has performed to lead the security industry in terms of organic growth and profitability. We’re in a world where technology is converging. You can think of us as just simple mechanical locks and closing devices, but we thrive in an arena where technology is converging and this is what investors need to think about. This is where wealth and growth is created and we’ve got a very profitable company that’s right in the middle of that convergence.

Eckersley: We’re a market leader on a global scale in an exciting (product) category. We have proven financial strength and performance in up and down markets and enormous growth potential opportunities for us as a company in growing our business capabilities and serving our customers.

 

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