Kroll's on a Roll

For Kroll (Nasdaq: KROL  ) investors, it's been an upbeat week. The company, which is a leader in global risk consulting, struck a $39 million deal on Friday to purchase Quorum Litigation Services, a provider of litigation support services. More importantly, the deal is accretive at $0.02 a share for 2004.

Founded in 1972, Kroll has emerged as a powerhouse in the growing industry for security services. A key reason for the growth has been successful deal making. As a result, Kroll provides a wide range of services, such as for forensic accounting, background checks, drug testing, litigation consulting, and electronic-data recovery.

Alas, a dangerous world has been quite beneficial for Kroll. In its first quarter, sales were $165.3 million, which represented a 59.7% increase from the same period a year ago. Net profits during this time increased 30.4% to $14.7 million.

But all deal makers know when to sell out. For Kroll, that day was yesterday, when it announced its deal with Marsh & McLennan (NYSE: MMC  ) . As evidenced by the $1.9 billion price tag, Kroll certainly is a savvy negotiator. The purchase is priced at a mouth-watering 32% premium.

This is not to imply Marsh & McLennan is getting the short end of the stick. The transaction is expected to be accretive by about $0.01-$0.02 a share for 2005 earnings. What's more, Kroll will be a highly strategic asset for Marsh & McLennan. After all, Marsh & McLennan has a strong presence in the same types of businesses as Kroll.

It's a powerful combination, and it is likely to scare Kroll's competitors, such as ChoicePoint (NYSE: CPS  ) and FTI Consulting (NYSE: FCN  ) . They may ultimately reach the same conclusion as Kroll and decide to sell out as well.

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Fool contributor Tom Taulli is the author ofThe EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any of the stocks mentioned.


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