| Volume 13, Issue 8 — April 27, 2016|
|Acquisitions in AV: What Really Happens|
By Richard Blackwell
My companies have been acquired twice and I have attempted numerous acquisitions. While I don’t have the experience of an investment banker like GE or SilverLake, I have been down many roads that few have the opportunity to travel, and it’s nothing like you think. Yes, there is almost always human impact because maximizing profits is valued over people as a rule still, and not the exception.
Why do companies sell themselves or buy others?
- Rather than opening a new geographical region of sales, it is often easier to acquire a company already entrenched in that region.
- A product manufacturer may acquire it’s distribution partners in order to create an exclusive sales opportunity.
- A partner retires and needs to convert his stock in the company to cash.
- A technology company may purchase integrators to directly serve their customer base.
Failures – Investors universally agree that to actually complete an acquisition is almost a miracle, and this is because there are so many things that can put a stop to the deal — many acquisition attempts fail. In all my efforts only once was price the failure point, and in that one case I had promised to keep all the employees after the purchase, but the owner chose to take the higher bid. In one acquisition at the 11th hour the owner decided he wasn’t ready for retirement. In one very large attempt, I was declined as a bidder because I could not write one check, but had to shop for multiple investors and that would have put too much information about the company on the street. Because of the diligence required to properly evaluate a company, price negotiation and transition plan, it will often take four to six months from start to closing of a purchase — it’s not a lot of fun when a deal falls apart, and a lot of time has been lost.
There are many methods for acquiring a company (or being acquired), and here are some of the more common ways AV companies get bought or sold (more on evaluation below);
- AV Company East Coast needs to expand to the west and so they search out and find AV Company West Coast that is for sale. While small companies do purchase bigger companies, it is more typical to acquire a same size or smaller company to keep the financing simple. The loan has to be paid out of the profits of the company, so if the acquired company is not profitable then reductions (people) have to be made to pay the loan.
- An investor looks for a profitable company (or one with value) that fits the model he is looking for and inquires if they are interested in discussing an acquisition, then working with an investment bank puts together a “deal” for acquiring the company using cash loans from other investors. The originating investor (“the guy that created the deal”) will typically get 2-4 percent ownership, while the cash investors will take the rest. Many times the investment bank is the originator and has its own pool of investment capital to work from. Business investors always purchase a majority holding from the owners so that they control the board.
- An existing partner in the firm sells out to the other partner at an agreed upon price. If the remaining partner doesn’t have cash in the pocket, she will obtain a small business load or the exiting partner will finance the loan for some number of years and receive a monthly payment as a capital gain.
- Mergers are potentially the most difficult to make happen, because there is no buyer to take the lead, so a lot of turf battles take place. Mergers, however, are better for reducing the human impact because everyone stays around after the closing and has to face the employees.
Evaluation — Before you can purchase (or sell) a company, everyone has to agree to what it is worth. While this can be excruciatingly complicated, there are some rules of thumb that that give a good initial value of the company. The most common for an equipment sales and installation company is “3x to 5x times the company’s EBITDA.” EBITDA is a more constrained approximation of net profits commonly used as a starting point for determining the value of a company. For example: if West Coast AV company has sales of $100M in the last year, and its EBITDA is $5M then the company could reasonably be sold for $15-$25 million dollars. Recent AV company sales have sold at 4.5x to 5x and is typical of most similar type companies in other markets. If the company is in distress or its business model is inefficient then the multiplier may be more like 3x or even less. Technology companies that make software or own Intellectual Property (IP) of some type could sell at 40x or more (e.g., the virtual reality company Oculus had no sales and sold for billions to Facebook — go figure). Evaluating the true best price for a company is more art than science, and a small mistake can set you back years in recovery or lose millions.
The Up Side of an Acquisition:
- Customers typically feel more confident in larger companies than smaller ones and so sales have potential to grow.
- Larger companies are more likely to create new technology.
- Employee Benefit packages from larger companies tend to be bigger.
- Employees are more stable long term.
The Down Side of an Acquisition:
- When East Coast Company buys West Coast Company, it already has people staffing all the necessary administrative, sales and installation roles, and so many of those duplicate roles may be eliminated.
- East Coast Company very likely now has a loan to service and so looks for ways to cut costs — again this means lost jobs.
- Highly experienced shop manager in West Coast Company is not known to the executives in East Coast Company, so will have to work extremely hard to hold the position over a similar manager transferred in from the East.
- Stress is high among all West Coast Company employees waiting for the first round of layoffs.
Buying a business is not so mysterious as one would think: It’s determining a fair value and then paying for it that is the difficult part. Every business should bring in a consultant to show them the ropes and help with decisions from an unbiased perspective.Leave a Comment
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|AV Pro Best Practices: You Can Never Be Too Neat Nor Too Precise|
By Lee Distad
We all know that consistency and accuracy are crucial standards for AV pros. When hanging a video display on the wall, or cutting out holes for speakers, and especially when hacking holes in your client’s house during retrofit installs, “eh, close enough” doesn’t really cut it.
Accuracy is always a virtue: “Measure twice, cut once,” as the saying goes. On one project I had designed, my installer had just taped templates to the wall for a pair of in-wall speakers. My client’s father who was hanging around the house, and a carpenter for fifty years, took one look at the paper templates, and in his old country accent told my installer, “They’re out of level by a 1/16 of an inch.” My guy re-measured, and it was true!
The necessary corollary to consistency and accuracy is cleanliness. The wilderness conservation slogan says, “Take only pictures, leave only footprints.”
When I was being trained up as an Assistant Wire Monkey-3rd Class (also known in most companies as a “Sales Designer”) I was taught that when you’re in someone else’s home, don’t even leave footprints.
For some precision and cleanliness are practically obsessions. One of my long-time work colleagues was famous for his attention to detail, especially his preoccupation with jobsite cleaning.
He believed that there are four cardinal things that should always be in your installer’s trucks:
- A vacuum cleaner and necessary attachments to clean up and leave the clients home looking better when you leave than when you arrived
- Lots of clean drop sheets
- Green or blue 2” painters tape for layout and surface protection
- Indoor shoes for the feet
It used to be said that he would be lost without his green painters tape. Not only did he rely on it to protect edges and surfaces in the home, but also as a template to determine cutouts, and the spacing of speakers, televisions and other wall-mounted hardware. As he once told me “Tape is the best! No need to worry about erasing or mistakes when doing layout, unlike a Sharpie, or pencil or ballpoint pen.”
I would even add to that list thin white cotton gloves — all the better to avoid leaving finger marks on white ceilings during the finishing phase. Also, if you do screw up and leave marks, M.r Clean Magic Erasers are a handy cleanup tool.
I’ve already implied that you should always leave the clients house looking as good as you left it, if not better, but sometimes this can be hazardous. My old friend once joked, “Once I had a customer phone the shop I used to work out of to complain that the room I was working in was cleaned to the point that he was embarrassed into doing the rest of the house. He was really pissed!”
Then again, most clients will be a little more grateful for your attention to detail than that.
Ralph Waldo Emerson intended it as an insult when he said, “Consistency is the hobgoblin of small minds.” If he were alive today, I would ask him how many AV installations he’d completed, and how satisfied his clients were.Leave a Comment
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|LeGrand Buys Luxul Wireless|
Legrand has signed a definitive agreement to acquire Luxul Wireless, an IP networking provider for professionally-installed, custom integration systems for residential and small-to-medium business (SMB) markets. Luxul, along with Pakedge that was acquired by Control4 earlier this year, are one of only two networking companies that specialized in routers and switches specifically for ProAV and HomeAV installs.
The explosive growth of IoT devices and automated systems throughout residential and SMB markets creates great demand for Luxul Wireless high-performance networks. As the leading networking provider in the market, Luxul Wireless will enable Legrand to capture this growing market demand.
This will further establish Legrand’s leadership position in the home AV systems market. We will see how this helps them on the ProAV space, too.
Luxul is here. Legrand is here.Leave a Comment
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|AVAD Magnifies Works With Nest Product Lineup|
AVAD has announced the addition of Rachio, a smart sprinkler control, to their extensive Works with Nest product lineup. In addition, Dropcases’ Waterproof Nest Cam enclosure is also new to AVAD.
Dropcases allow users to turn Nest Cams into outdoor installations for a new level of safety and security while providing incredible camera resolutions, real-time talk and listen, and night vision capability. The Weatherproof IP66 Enclosure from Dropcases is specially designed with a polarized lens and anti-reflection ring to give a crystal clear camera image in both daytime and nighttime settings. With the ability to run the Nest Cam cable through the gooseneck of the Weatherproof IP66 Enclosure, installation is quick and easy. To celebrate the addition of Dropcases during AVAD’s Outdoor Month, AVAD dealers will receive a free, weatherproof Dropcases with purchase of three Nest Cams during the month of April.
The Rachio smart sprinkler controller makes utilizing sprinklers easy while saving water and money. The mobile app lets users adjust their sprinkler system from their smartphone or computer. The EPA WaterSense certified Rachio controller connects to user’s Wi-Fi and accesses local weather data to automatically create and adjust watering schedules to save water and money, including never watering when it rains. A user can enter specifics about their yard such as soil type, vegetation, slope, sun exposure, and nozzle types to get the best possible recommendations. When users connect to Nest, they can get their Rachio water savings in their monthly Nest Home Report. Additionally, if their Nest Protect detects smoke, Rachio will cycle through their sprinkler zones for protection.
AVAD is here.Leave a Comment
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|Sony Adds HDR to Its 4K VPL-VW365ES Projector|
Sony Electronics announced today that it is bringing HDR capability to its 4K VPL-VW365ES home theater projector in May, and that current owners will be able to add the feature with a firmware update. Introduced at CEDIA 2015, the VPL-VW365ES is the third Sony home cinema projector, after the VPL-VW5000ES and VPL-VW665ES, to support the 4K HDR format.
Sony says that HDR video content delivers exceptional detail, color and contrast, with a far wider range of luminescence than other video formats. They claim the result is the most lifelike picture projectors have ever been able to create, with brilliant highlights and fine detail. Home cinema enthusiasts will now have the opportunity to experience total immersion through the imagery displayed from their VPL-VW365ES projector. HDR imagery is the closest representation of the reality our eyes see every day, with greater detail, wide contrast ratio, increased color volume, brighter highlights and deeper blacks.
The VPL-VW365ES uses advanced SXRD panels for a native 4K picture, with no artificial manipulation of pixels so that over 26 million pixels are displayed with each refresh cycle. Rich and accurate color reproduction is ensured by Sony’s proprietary TRILUMINOS engine design, while Motionflow picture technology serves to deliver clearer, less blurry images when watching fast-paced, cinematic or sports action.
The VPL-VW365ES allows users to enjoy the latest 4K and HDR content services using the latest HDMI standard and HDCP 2.2. A built-in RF 3D transmitter provides interface to industry-standard 3D glasses with a strong wireless signal for wider coverage and uninterrupted 3D synchronization stability. Professional calibration features allow operators to expertly adjust the picture to suit the viewers’ tastes. These color correction tools allow access to adjust the hue, saturation, and brightness of each color and the color space for red, green, blue respectively, to their desired level.
The VPL-VW365ES home theater projector was introduced at CEDIA 2015 at a suggested retail price of $9,999.99. All the specs are here.Leave a Comment
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|Datapath’s ActiveConnect Cables Don’t Require Power|
Datapath has launched a series of long-range fiber optic DisplayPort1.2 and HDMI2.0 cable, with lengths up to 100m that don’t require additional power and measure just 7mm in diameter. They are designed to provide a direct connection from any graphics card, including the Datapath ImageDP4, to either DisplayPort or HDMI monitors or from media players to Datapath’s HDMI or DisplayPort capture cards.
All video wall or digital signage installations require careful planning around how to connect sources to video wall equipment, and graphics cards to screens. Many cables can be large, heavy and difficult to manage, especially when installers are attempting to accommodate large bundles of cables from a video wall controller to a bank of screens, which is typical in many control room, hospital and live event applications. Another challenge is that conventional long-range solutions require additional power at both the transmitter and receiver end of the solution. However, Datapath’s ActiveConnect series overcomes all of these issues with a single, DisplayPort to DisplayPort or HDMI to HDMI fiber optic cable.
Along with the absence of additional power requirements a further USP is the transmission of full 4k signals at 60 fps to suit all high resolution applications. Each cable is HDCP compliant, allowing for protected sources to be carried within the Datapath system. In addition, the cables are Plenum-rated, ensuring they can be installed safely into building cavities such as walls, floors or ceilings.
Installation is simplified not only by the small 7-millimeter diameter of the cables, but by a weight of just 15 grams pre-meter (including connectors) and a maximum bend radius of 6mm, which allows cables to be maneuvered around obstacles with ease.
ActiveConnect cables are available with either DisplayPort 1.2 or HDMI 2.0 connectors. The DisplayPort is available in 25, 50 and 100 metre lengths, with the HDMI currently available in 25 and 50 meters, with 100 meters coming soon.
Here are the details.Leave a Comment
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|RoseWater Energy Group Implements Updates to the Residential Energy Management HubRosewater Energy Group has announced updates to the RoseWater Energy Group Residential Energy Management Hub. The Residential Energy Management Hub features a new communications panel with a micro-computer to unify communications and add code space for custom algorithms. The added panel enables RoseWater Energy Group engineers to directly reach the Hub and remotely program updates into the system from the engineering lab at Alpha Technologies. By remotely updating the system, Hub owners won’t have to worry about scheduling in-home updates or programming the system on their own. Additionally, the inner-bay wiring has been reorganized to provide each wire a unique place to reside on the added raceway. The raceway provides knockouts for PV wiring into the plant with an added RJ-45 connector for house networking on the outside of the Hub. OpticsRW, featured at CEDIA EXPO 2015, is available in full capacity to all Hub owners to provide additional software to monitor the use and storage of the Residential Energy Management Hub.|
Designed for users that understand the value of protecting their electronics, the Residential Energy Management Hub is the only unit of its kind currently on the market. The Hub is the first all-in-one residential and light commercial power solution to integrate three capabilities into one platform to serve the entire needs of one premises. The Hub offers a seamless total system integrated solution, using a dual inverter system with solar input that blends power conditioning, backup, and renewable energy management into one pre-assembled, configured and integrated industrial-grade platform.
For more information on the Residential Energy Management Hubs and RoseWater Energy, go here.Leave a Comment
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|Kramer Adds 4K UHD Active Fiber Optic High-Speed HDMI Cable with Removable ConnectorsKramer’s CLS-AOCH cables are plug-and-play HDMI active optical cables. CLS-AOCH cables support resolutions of up to 4K UHD over long cable runs (up to 100 meters) without the need for an external power supply or additional extenders. CLS-AOCH/XL is unique with its removable HDMI-A ends that allows the cable to be easily pulled through small conduits|
- Video resolution — 1080p full HD, Deep Color 48-bit, 3D, 4K @30Hz (4:4:4), 4K @60Hz (4:2:0).
- Embedded audio — PCM 8-channel, Dolby Digital True HD, DTS-HD Master Audio
- HDMI compliance — HDCP, EDID, CEC
- Construction — four optical fibers and six copper wires
- No external power — Powers the active units via the HDMI connector, consumes only 0.25W (50mA @5V)
- Very thin construction — 3.4-mm (0.13″) diameter
- Small bending ratio — Only 6-mm (0.24″)
- Pull strength — 500N (50kg)
- Available length: 10, 15, 20, 30, 40 and 50 meters
Here are the details.Leave a Comment
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|URC Introduces HomeSet RemoteURC introduces HomeSet, a streamlined system optimized for the home security solutions channel. This is a completely new system build from the ground up by URC — new technology, new hardware, new software. It utilizes cloud-based programming and maintenance, and offers cloud compatibility with other cloud-based systems. HomeSet integrates with Z-Wave devices, Nest, SONOS and hundreds of other popular devices, and can control up to eight rooms. The included HomeSet app is unique and allows rapid launching of up to eight embedded apps including full compatibility with control apps from every major security and alarm panel manufacturer.|
Pricing at the time of introduction is $299 (MSRP) for the C100 HomeSet Automation Hub and smartphone app. The R100 HomeSet Remote Control is available for $299 (MSRP) and is the perfect accessory for the bedroom and TV room. HomeSet is not a DIY product; it is simple to install but still requires professional installation.
Here are the details.Leave a Comment
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|Somfy Introduces the Dimmable LED RTS Light Kit to Expand Use of Outdoor Living Space|
Somfy Systems has announced the launch of the Dimmable LED RTS Light Kit, a convenient lighting solution for awnings and pergolas.
Saying they are easy to install and operate, Somfy says the light kit can be controlled with the same remote used to operate Somfy motorized awnings. App control is also offered through the Somfy myLink, available for smartphones and tablets.
The Dimmable LED RTS Light Kit is customizable and you can choose between warm and cool white and 12 different levels of brightness, plus the ability to set a preferred “my” setting.
Available as a turn-key kit that can control up to six Somfy LED light strips, the lighting kit is easy to install quickly in both new and existing Somfy motorized installations without the need for an electrician. LED bars can be mounted on top of the awning arms for ambient light or facing down for stronger light, depending on preference.
Combine the Dimmable LED RTS Light Kit with Somfy’s Infrared RTS Heat Receiver to create the perfect outdoor oasis, whether it’s a bright afternoon or a late night. Also perfect for restaurants and hotels, providing extra space outdoors and increasing sitting capacity year round.
Here are the specifics.Leave a Comment
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For all you REGULAR readers of rAVe HomeAV Edition out there, hopefully you enjoyed another opinion-packed issue!
For those of you NEW to rAVe, you just read how we are — we are 100% opinionated. We not only report the news and new product stories of the high-end HomeAV industry, but we stuff the articles full of our opinions. That may include (but is not limited to) whether or not the product is even worth looking at, challenging the manufacturers on their specifications, calling a marketing-spec bluff and suggesting ways integrators market their products better. But, one thing is for sure, we are NOT a trade publication that gets paid for running editorial or product stories. Traditional trade publications get paid to run product stories — that’s why you see what you see in most of the pubs out there. We are different: we run what we want to run and NO ONE is going to pay us to write anything good (or bad).
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A little about me: I graduated from Journalism School at the University of North Carolina at Chapel Hill (where I am adjunct faculty). I’ve been in the AV-industry since 1987 where I started with Extron and eventually moved to AMX. So, I guess I am an industry veteran (although I don’t think I am that old). I have been an opinionated columnist for a number of industry publications and in the late 1990s I started the widely read KNews eNewsletter (the first in the AV market) and also created the model for and was co-founder of AV Avenue – which is now known as InfoComm IQ. rAVe Publications has been around since 2003, when we launched our original newsletter, rAVe ProAV Edition.
rAVe HomeAV Edition, co-published with CEDIA, launched in February, 2004.
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