H.I.G. Capital (owner of Trinity Services Group – a commissary operator) is planning to acquire the Keefe Group. These are two of largest players in the correctional market.
Prison and jail commissary rakes in 1.6 billion dollars in sales a year, which is a huge number. As many facilities offer inmates commissary through the Department of Corrections, many facilities decides to outsource their commissary to private companies like the Keefe Group and Trinity.
Because the two companies are privately owned, their profit margin data is hard to find and because of so, the merging of the two largest players in the correctional market may be a bit of concern for the incarcerated, their family members and antitrust controllers.
According to a survey in 2013 by the Association of State Correctional Administrators (ASCA), one-third, of 34 state prison systems that were survey, are in business with a private company of some sought. The majority of privatizations were in county jails. The number of prisons and jails to outsource to private companies are steady on a rise.
As far as profits for contractors are concerned, the number of inmates play a huge role, of course, and as facilities cut their food and subsistence budgets, the incarcerated are now forced to pay out of pocket for those items that prisons/jails now lack. Meaning, before facilities outsourced their food service operations, the incarcerated would have access to many items free of charge through service within a cafeteria. But afterwards, commissary purchases would increase because those free items in which they had the privilege to in the cafeteria were no longer available. As far as this outcome is concerned, many different outcomes result due to outsourcing as well, including: offering free soap to inmates, but making them pay for their toothpaste or, making inmates buy their own underwear. The list goes on.
With this merger, $875 million in annual revenue is possible out of the $1.6 billion total yearly revenue brought in by the commissary market as a whole. As a portion of this $1.6 billion is of government-ran commissary, the merger clearly takes more than 50% of the entire market. However, portions of Trinity’s revenue is derived from non-commissary items.
There are three dominant players in the commissary market: Keefe, Trinity and Aramark. When bidding for contracts, the lowest prices offered of benefit to the incarcerated and their loved ones do not always mean a win for a company, as facilities often receive a commission from private commissary operations. And because less competition will be a factor due to the merger, those facilities that happens to want to negotiate for a fairer pricing system will get the short end of the stick.
Based on the market shares of both companies, it doesn’t appear as though one needs the other as far as capital is concerned. So based on the evidence presented, this merger is just an act to dominate the market.
The incarcerated, the family members of such and those antitrust controllers are in for a bit of a scare. And just maybe antitrust controllers should take a really deep look into the intentions of the merger, maybe they will find out that it would be best to not allow this merge to happen.
About the Keefe Group
The Keefe Group has been in business since 1975 and is definitely a leader in the correctional market. Currently in contract with over 800 prisons/jails nationally – both publicly and privately – and shipping over 25 million pounds a product a month. The Keefe Group deals with commissary items of a large variety, including but not limited to: food, snacks, electronics, personal care items, clothing, music and more.
Many Directors of Fiscal Operations are in total appreciation to have the pleasures of working with the Keefe Group. The work relationships are phenomenal and not just within short periods of time, but over the long haul – over 10 years in some cases.
Business managers are completely satisfied with how the Keefe Group simplifies its technology. A real pleasure and joy experienced as a customer of the Keefe Group – many customers have agreed.
Trinity will definitely be a satisfied party to have such a business on their side. And as some commissary items of Trinity aren’t the best tasting – as many customers have agreed – clients of trinity can now add the delectable tastes of the Keefe Group to the mix.