Genesis Acquisition of Edcom Tells Tale of Two Companies

$40 million Genesis Integration scoops up assets of $6.5 million Edcom Multimedia, demonstrating one firm poised for growth in a market that is spitting out those that are not.

Tom LeBlanc Leave a Comment

Edmonton, Alberta-based Genesis Integration acquired London, Ontario-based Edcom Multimedia Products.

OK, an approximately $40 million integration firm acquiring a $6.5 million integration firm isn’t exactly jaw-dropping news. However, the acquisition does a nice job of encapsulating exactly where the integration market is at the beginning of 2017.

In our 2017 State of the Industry Report we illustrated a trend.

During the past year, 42 of NSCA’s member integration firms disappeared.

In many cases, the disappearing firm was run by a Baby Boomer-aged principal in the twilight of a career in which they had success with a business model that is now clearly outdated.

As president of NSCA, McCarthy has a different perspective on Edcom and the 42 member companies the organization lost in the past year.

The shift from relying on product- and project-based revenue to a more service-oriented model is … Well, it can be difficult to change course so late into a journey.

Often those acquired companies didn’t exactly go away. Their owners found their employees continued employment and an exit plan for themselves in the same package.

That is pretty much what happened in the case of Genesis acquiring Edcom, says Genesis president Kelly McCarthy who is also president of NSCA.

“Changes in our industry meant that we had to make a change,” says Edcom owner Wayne Gowanlock in a Genesis press release.

“We are excited about the opportunities this brings for the Edcom employees and look forward to better serving our clients with the Genesis team.”

Three quarters of Edcom’s 16 employees have landed safely with Genesis on the other side of the acquisition.

Pick a Lane

As we enter 2017 integration firms seem to fall into one of two categories:

1.) They’re looking to get out.

2.) They’re ramping up to capitalize on what they see as unique opportunities for well-qualified firms.

Count Genesis among the latter.

McCarthy will be the first to tell you that Genesis was as traditional as integration firms get when it comes to project-based business models.

For the last few years, however, it has arduously turned its ship around, reworking its infrastructure, rethinking its sales approach and fine-tuning a video conferencing as a managed service offering.

Not only does Genesis’ managed services business put it in a position to be growing instead of fleeing the integration market, McCarthy says it energizes expansion opportunities.

For instance, with Genesis’ video conferencing as a managed service solution Edcom’s sales team is able to go back to their customers with a fresh message. “Now they’re able to offer a different level of services and products than they were able to previously,” he says.

Related: 6 Integration Firms the Entire Industry Can Learn From

The Edcom acquisition fits into Genesis’ growth strategy. London, Ontario is far enough away from Genesis’ Toronto and Ottawa offices that it allows the firm to provide good coverage in Ontario, Canada’s most populous province.

Genesis’ goal is to become a $50 million firm by the end of 2018, McCarthy says. It’s around that point, he says, when an integration firm becomes large enough to blur that line between product- and service-revenue. “When you get there you can negotiate some rebates and the product piece becomes more relevant,” he says.

As president of Genesis, McCarthy finds himself in a fortuitous position able to grow through acquisition of an embattled firm.

As president of NSCA, McCarthy has a different perspective on Edcom and the 42 member companies the organization lost in the past year.

He says when he stands back and looks at the number of recent acquisitions, he sees firms that he never thought would be in the acquisition mode. It’s clear that for the well positioned ones, there is opportunity.

Integration firm leaders are at a point where they’re having frank discussions while looking in the mirror, McCarthy says.

“It’s either time for me to get out and look for an opportunity to do that, maybe work for a couple of years in another [non-principal] capacity. Or the other side is deciding to grow my business, get some mass and looking for an opportunity to acquire.

“I think you’re seeing those two schools of thought right now.”

Watch Genesis’ Kelly McCarthy discuss his goals as NSCA president:

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