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In Shreds
A young Florida entrepreneur profited nicely from this rising fear over sensitive documents. Barry Grahek started Shred-All Document Processing eight years ago at the age of 23 and built it into the largest confidential document shredding company in Florida - and one of the biggest in the country. In June, Grahek sold his Jacksonville company to Republic Industries subsidiary Southland Recycling Services for a chunk of Republic stock and the promise of a vice presidential position. But last month, just six weeks after the deal was done, young Grahek found his job in the shredder when the bosses at Southland concluded that his entrepreneurial ways were at odds with their corporate culture.
In building his little company, Grahek developed a little-noticed business niche that plays on companies' growing dread of losing profits because of loose information. "Inadequate information security controls have caused losses in everything from market share to prototypes to profits," says Grahek. "This is a very young industry which will capture tremendous growth as the industry matures." While the purchase of Shred-All hardly registered a blip on Republic's radar screen, analysts and industry experts suspect Republic Industries may use Shred-All as leverage to gobble up similar companies and consolidate the splintered industry. Placing a value on the mercurial market is difficult due to fluctuations in demand for scrap paper; industry consultant Bob Johnson, president of Phoenix-based R.J. Johnson & Associates, pegs it anywhere between $200 million and $350 million in the U.S. Other than a handful of firms like Shred-All, which posted revenues of more than $6 million last year, most of the 450 or so companies that haul out and destroy sensitive documents are mom-and-pop operations. The market is ripe for consolidation, which could fit into Republic Chief Executive Officer H. Wayne Huizenga's grand scheme of growing the burgeoning conglomerate by acquisitions. Officials at Republic and Southland downplay possible plans to establish a large foothold in the industry. "We'll take growth one step at a time," says Southland Recycling President Barbara Drake. David Potts, vice president of Republic's corporate treasury, called the purchase of Shred-All a mere "tuck" in their solid waste operations.
As for Grahek's brief career at Southland Recycling, he says: "I was attracted to this deal because I thought Republic, as a fast-growing company, would view my participation as an asset. Obviously they didn't." Drake declined to respond, saying she can't comment on personnel matters.
Grahek hit upon document shredding soon after graduating from Clemson University with a degree in electrical and mechanical engineering. In his first job at an engineering firm that consulted with paper mills, he was dismayed by how low-grade paper fouled recycling operations. Seeing an opportunity, he quit the firm and started Shred-All by acquiring a used shredder at an auction. His plan: Collect high-quality office paper that large corporations toss out by the ton, then sell it to paper mills for a tidy profit. But companies refused to hand over used paper embedded with sensitive information. So, Grahek promised would-be clients security: Their paper would be removed in locked boxes, transported in unmarked trucks and shredded in plants surrounded by high-security systems.
Comfortable that their secrets were safe, an impressive list of clients, including Florida operations such as Barnett Banks, First Union, Prudential and AT&T subsidiaries, signed on. When he sold Shred-All, Grahek had established shredding plants in five states and at times served clients in as many as 17 states, mainly in the Southeast. Demand grew with heightened fear of spying by rivals and concern about privacy laws.
AT&T figures secure information control is good for marketing. "It's a good selling point," Burgio says. Barnett Banks recently tightened its shredding procedures throughout Florida. Nearly two years ago, bank security was shaken when a Miami reporter ferreted confidential papers from a dumpster. Says Carl Ashauer, Barnett's manager of investigation: "Everyone is sensitive about customer information." As the name implies, Shred-All grinds up in its gigantic shedder machines nearly anything that may involve trade secrets or liability, ranging from prototypes of playground equipment and race car tires to bad batches of credit cards and mass quantities of airline tickets. The company also destroys slightly damaged manufactured goods, which if thrown away could end up in the underground market and cause liability nightmares for the maker. Indeed, some Shred-All clients, like Jacksonville-based contact lens maker Vistakon, are so tight-lipped about their products they won't even discuss shredding. "This information is proprietary," a Vistakon spokesman says warily.
And speaking of proprietary information, Grahek shies from going into detail about his future, but does allow that the corporate environment stifled his entrepreneurial spirit. "It'll take me some time to mentally step away from Shred-All, but I'll move on to other ventures."
