Screening company sniffs out new deal
By KRIS HUNDLEY, Times Staff Writer
First Advantage, a newly public company specializing in background checks, is buying its fifth business in three months.
© St. Petersburg Times
published September 12, 2003
ST. PETERSBURG - John Long, chief executive and president of First Advantage Corp., didn't have to look far to find his latest acquisition.
On Thursday, the fast-growing company housed on the top floors of downtown's Bank of America tower said it was buying a company right across First Avenue South: Omega Insurance Services Inc.
No dollar figure was disclosed for the acquisition, which was a combination of cash and stock.
The deal broadens the services offered by First Advantage, which specializes in criminal background, drug and driving record checks for employers and landlords. Omega, founded in 1996, focuses on insurance fraud investigations and has more than 200 investigators in 38 states, plus 100 employees in St. Petersburg.
Omega puts investigators on the street, doing surveillance of worker's compensation claimants for employers who question the severity of their injuries. The payoff comes when they get videos of a man with a back injury pushing a car or a woman with carpal tunnel syndrome lifting a refrigerator.
Long, who has snapped up five companies since taking First Advantage public in early June, said adding investigators to his company's largely computerized database business will be a selling point.
"Our screening services are more or less commodities and we're looking for things that differentiate us with our customers," he said. "We want to be more than the guy who does criminal background checks. And if we do the high-end, higher-margin investigative searches, then we'll get the commodity business."
First Advantage's shares rose slightly on news of the Omega purchase, up 15 cents to close at $17.40. Geoffrey Dunn, analyst with Keefe, Bruyette & Woods Inc. in Hartford, Conn., said the deal fits into the company's game plan.
"It's a business that complements their core operations and gives about a 12 percent boost to the revenue line," Dunn said. "And John has a long history of making rollups work."
Long's earlier acquisitions were competitors in sectors where First Advantage already does business. He said he expects to complete up to 15 deals by year end.
"My goal is to get our criminal background and drug business to $100-million each in revenues by 2005," he said of First Advantage's largest categories. "They're only at $40-million each now. I don't have the luxury of waiting between deals. This game wil be over in a year."
Long said he expects First Advantage's criminal and drug screening business to be ahead of competitors ChoicePoint of Alpharetta, Ga., and USIS of Annandale, Pa., by the end of next year. And he has little patience for anyone worried about giant conglomerates prying into people's pasts.
"I only hear that from civil libertarians and people with something to worry about," Long said. "It's ironic we're announcing this deal on Sept. 11. Our services are more important now than ever."
As Long builds First Advantage's empire, now at 1,500 employees, with 350 in St. Petersburg, he tends to retain existing management. That's the plan with Omega's president, Tim Fargo, and vice president, Richie Taffet, who will run the investigative business as a division of First Advantage. Omega will retain its name, separate offices and employees.
"I love entrepreneurs; they're the guys that move companies," Long said. "I hate making people too rich so they really don't want to work."
Fargo, who started Omega in his spare bedroom and built it to $20-million in revenues, said he expects the deal to free him up to build the business.
"To me, this means all the fun and none of the calories," he said. "I told the employees it means we'll grow bigger, faster, stronger."
Fargo and Taffet said they had been searching for ways to move Omega forward, exploring bank financing and private equity investments.
"I got the impression some investors were going to exercise an incredible amount of direction and control," Fargo said. "I'd be thinking, "Why are these strings on my hands?' "
Omega started working in February with Beach Capital Advisors, a company recently formed by Tom Cardy and David Burns, formerly of Communications Equity Associates in Tampa. On St. Patrick's Day, Fargo and Taffet had their first get-together with Long, over dinner at Bonefish Grill in St. Petersburg. By June 13, they had an offer in hand.
The deal was signed Wednesday evening in First Advantage's penthouse offices. Then Long, Fargo and Taffet headed over to a party at the Midtown Sundries restaurant to introduce the new boss to Omega's employees.
There was just one hitch. Long, who usually dresses in polo shirt and khakis, had worn a suit to work Wednesday because an investment banker was visiting. Taffet, whose uniform of jeans and sneakers is worn by most of Omega's youthful workforce, was worried that Long's formal attire would be intimidating.
"I told him to lose the tie before he came to the party," Taffet said. "And he did."
-Kris Hundley can be reached at email@example.com or 727 892-2996.
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