The Implications of H.I.G. Capital’s Acquisition of AVI-SPL

avispl-about_img-0516Richard Stokes, managing director of the $19 billion private equity investment firm H.I.G Capital says, “AVI-SPL is the established market leader in the AV systems and collaboration solutions market and we look forward to supporting the continued expansion of the company’s service offering and geographic footprint.”

Today the EMEA part of AVI-SPL’s geographic footprint includes UK and Dubai. And the UK (where they have created a Huddle Room experience identical to the one at Tampa HQ) doubled in size last year, according to their company reports. In the US, they are the largest AV company in the country – with offices in over 24 states.

Headquartered in America (Tampa, Florida), the company has 1500 employees throughout 35 locations worldwide (29 offices in USA). As the founding partner of the AV Global Alliance, AVI-SPL has a worldwide footprint that encompasses 30 countries and currently includes 28 partner companies. And it 2015, it was named as Polycom Global Reseller of the Year.

Ranked in the U.S. as the #1 systems integrator in size in 2015, AVI-SPL saw sales revenue in AV of $577 million. To give you an idea, the next company on the list only reached $270 million in sales. That dominance in USA makes AVI-SPL the world’s largest specialized AV integrator.

At its annual Sales Acceleration Summit, AVI-SPL reported a 20 percent growth in bookings, which they say is almost double the average growth of the US industry. CEO John Zettel attributes that growth mainly their focus on the enterprise space where large projects (RFPs that include an entire environment or campus, instead of sole meeting room) are now in fashion. That makes sense as corporations try to embrace the generational shifts in working habits as well as the latest in smart building technology.

Zettel predicts their managed services will have triple digit growth in 2016. While AVI-SPL is more than double its nearest AV competitor, the company falls to #46 in USA when put amongst IT solution providers. No matter who you are, someone is always bigger.

And that’s good, because private equity firms usually sell off their investment in a 3-5 year period. As soon as H.I.G. Capital thinks about buying a company, they need to consider who they can sell it to — in order to realize their investment.

And if you are already the biggest in your sector, you won’t be sold to companies half your size.

Todd Ofenloch, Managing Director at H.I.G. Capital says, “AVI-SPL is exceptionally well positioned for continued growth, driven by the critical nature of its solutions within increasingly tech-enabled work spaces. We are excited to work with the company to take the business to the next level.”

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But what is “the next level?”

Let’s talk about private equity companies, in general, for a minute. First, and most importantly, responsibility for repaying the debt incurred when the private equity firm borrows money to buy a company falls on the company that was acquired – not on the private equity firm. The only money the private equity firm and the investors in its investment funds usually have at risk is the initial equity they put up as a down payment. Not surprisingly, they would like this to be as small as possible. Because private-equity firms are, by definition, equity investors, they make money only if they improve the performance of their companies.

The H.I.G. Capital deal makes sense if it can provide capital to AVI-SPL that supports rapid growth. That growth needs to come from inside (cost-savings) or outside (acquisition or substantial business growth). Probably the later in this case.

Zettel, who has done an excellent job as CEO so far, says, “We’re proud to partner with H.I.G. Capital, a highly respected firm that is aligned with AVI-SPL’s vision of the future and the strategic plan to get there.”

“AVI-SPL continues to distinguish itself through the rapidly growing collaboration solutions space. Together with H.I.G. Capital, our potential for accelerated growth to meet the needs of tomorrow’s enterprise clients is limitless.”

AVI-SPL must now become even more aggressive. It can drive its bookings growth up even higher than 20 percent by taking more business from competitors. It can grow organically by adding new areas of product. It can buy up some of the smaller companies in USA. It can acquire companies overseas… even make offers for some of its partners in the Global Alliance.

Or it can try to do all of the above in a concerted way. Regardless of the strategy, you can expect to see more action at AVI-SPL. The $500 million level is a known “stall point” for many fast-growing companies — and usually “the next level” is a billion dollar company.

No AV integrator has achieved that before, but at a consistent 20 percent growth a year AVI-SPL will be there shortly — at the end of the magic three-year period that private equity so loves.

AVI-SPL is here.