Tampa, Fla.-based AVI-SPL, the AV integration industry’s largest firm which was on pace for $720 million in 2017 revenue, has strengthened its Canadian presence by acquiring Calgary, Alberta-based Sharp’s Audio Visual which was on track for $53 million in revenue.
The merging of these integration firms will have ripple effects on the industry.
- How will the Canadian market react to the AVI-SPL acquisition and the company now emerging as a national unified communications and collaboration (UCC) provider?
- What happens now that the Global Presence Alliance’s (GPA) Canadian partner, Sharp’s Audio Visual, is acquired by a non-GPA member?
- What will be the next move in the “arms race” between AVI-SPL and second largest integration firm Diversified?
CEO John Zettel was willing to tackle these topics and more yesterday, one day after the AVI-SPL acquisition of Sharp’s Audio Visual was announced.
There was snow on the ground in Calgary as the CEO discussed his firm’s investment in the Canadian integration market alongside Jeff Faber, president and CEO of Sharp’s Audio Visual; and Boris Koechlin, AVI-SPL Canada managing director.
AVI-SPL Is Big on Canada
Tampa-based AVI-SPL has had a Canadian presence for four years, expanded its Virtual Meeting Room (VMR) program into Canada last year and had four offices in the Great White North prior to acquiring Calgary-based Sharps and its eight offices.
“Canada is a big economy,” Zettel said, adding that many multinational companies in Canada do a lot of business in U.S. and Europe and the opposite is true as well. His point: “This is a real cross opportunity on the model that we’re building to become the global integrator.”
“There are some national players who’ve got locations in some parts of the country but nobody is truly national,” says Jeff Faber of Sharp’s Audio Video, on the state of the Canadian integration market before the AVI-SPL acquisition.
The AVI-SPL acquisition allows the company to leap ahead of where its organic growth in Canada was already taking it and quickly “create a much bigger physical presence.”
Having a big physical presence is important in Canada for obvious geographic regions, added Koechlin.
It has been a challenge for any Canadian integration firm, even the ones with several locations, to service the entire country.
“The opportunity we saw even four years ago when AVI-SPL came to Canada was to be able to have a strong presence and be able to follow our customers not just coast-to-coast in Canada but around the world,” Koechlin said. “That’s a value proposition that’s fairly hard to find in Canada.”
AVI-SPL has changed that, he said. “What this acquisition does is build that story even further. We’ve organically gotten to four of the cities and now we go coast to coast.”
In the press release announcing the acquisition, AVI-SPL touts Sharp’s Audio Visual ability to deliver unified communications and collaboration (UCC) solutions. The merger, it adds, creates an integration that becomes Canada’s first nationwide provider of UCC.
Faber agrees. The reason there wasn’t already such an integration firm is the fragmentation of the Canadian market with “a lot of small mom and pop operations,” he said.
“There are some national players who’ve got locations in some parts of the country but nobody is truly national, and they’re not necessarily focused in the whole UCC space and that’s where the big opportunity is.”
“With our coming together and our individual practices in UCC particular around Microsoft and Cisco that’s where the real opportunity is to break apart some of this small fragmentation in the marketplace and really be the true UCC leader.”
Is Diversified’s Aggressive Growth Driving AVI-SPL Acquisition?
Bill Russell had Wilt Chamberlain. Coke has Pepsi. Roger Federer has Rafael Nadal.
“I know the timing can make it appear like there is an arms race going on,” says CEO John Zettel, but the AVI-SPL acquisition “was done because we wanted a stronger local presence in Canada.”
So often a leading competitor is propelled by an opponent that always seems to be nipping at their heels.
With Diversified recent revenue surge driving by acquisition including the high-profile acquisition of Technical Innovation and MCW (the day prior to the Sharp’s announcement), it’s easy to wonder if AVI-SPL is focused on staying on top.
“The answer is no,” Zettel said, emphatically.
“We make our decisions based on what we feel is the right direction for our company and the opportunities that are in front of us. This is not a consolidation or roll-up play. This is us making ourselves truly the first global company in the AV and UCC space.”
That being said, Zettel understands that it looks like an “arms race” between AVI-SPL and Diversified to many in the industry.
“I know the timing can make it appear like there is an arms race going on but this deal was done not to add more revenue to AVI-SPL’s coffers. It was done because we wanted a stronger local presence in Canada. This was never done because we want to one-up anybody or stay ahead of anybody. It’s what’s best for AVI-SPL.”
AVI-SPL Acquisition Impact on Global Presence Alliance
Sharp’s Audio Visual was a prominent member of the GPA and its sole Canadian representative. That means changes are coming.
“Sharp’s is automatically suspended from the GPA and there’s no doubt that the board will make a decision to remove us from the GPA because of this transaction,” Faber says. “That being said, I also have no doubt that they’ll look for a new partner in Canada very quickly.”
“The mechanics of the GPA are very simple,” Faber said.
“The moment there’s a change of control in your organization, the organization is automatically suspended. So Sharp’s is automatically suspended from the GPA and there’s no doubt that the board will make a decision to remove us from the GPA because of this transaction.”
“That being said, I also have no doubt that they’ll look for a new partner in Canada very quickly because that’s a hole they’ll want to fill.”
Attempts to reach GPA representatives for comment have been unsuccessful so far.
AVI-SPL is not involved with the GPA but Zettel says it was appealing that Sharp’s was. “When we started talking to Sharp’s there were some things about Sharp’s that just instantly resonated with us and one was their GPA participation from the standpoint that they are thinking globally as an origination,” he said.
“We have been thinking globally for years. It’s a mindset, not just an execution. We like that aspect of it.”
Meanwhile, Faber isn’t looking back. “One of the challenges of an organization like that [GPA] that I think is now eliminated for us is working globally with other organizations does create some revenue challenges,” he said.
“It’s a great idea and it worked pretty well, but we can deliver globally with this AVI-SPL acquisition. We just think it’s a much better way to attack with one complete organization, one playbook.”
AVI-SPL Inches Closer to Becoming the first $1B AV Integrator
When you consider that AVI-SPL forecasted $720 million in 2017 revenue for CI’s Fast-Growing Firms coverage and that Sharp’s predicted $53 million in the same report, well, it seems likely that AVI-SPL will finish 2017 with over three quarters of a billion dollars of revenue.
“When we talk as a management team and when we talk as an organization we do have the aspirational goal of reaching $1 billion,” says AVI-SPL’s Zettel.
Consider that since AVI-SPL was acquired itself by global private equity firm H.I.G. Capital, which manages more than $19 billion equity capital, the integration firm has been extremely aggressive with growth strategies.
Noteworthy moves include:
- AVI-SPL Acquisition of video production firm VideoLink
- Acquisition of California-based Anderson AV
- Launch of a Frankfurt, Germany office
- Partnering with a company considered “the AVI-SPL of Asia”
It all adds up to the $1 billion revenue milestone being increasingly realistic.
Zettel is honest about that fact that, in some ways, the goal of reaching $1 billion revenue is important to AVI-SPL.
“The truth is that there are always report cards in life and there are always goals established in life. When we talk as a management team and when we talk as an organization we do have the aspirational goal of reaching $1 billion,” he said, before quickly adding a caveat.
Reaching $1 billion revenue, he said, would be less about the big number itself and more about what it would represent – a billion little victories and the sum of the parts equaling cumulative success.
Why Sharp’s Audio Visual Was Open to Being Acquired
Just three months ago, Sharp’s was featured on CI’s list of 10 fast-growing integration firms. In the coverage we cited the $50 million firm’s profitability.
Sharp’s Audio Visual has grown its probability in ways that by doing some things that most integration firms have found challenging. It’s an AV integration firm that is effectively playing in the IT market, so to speak.
As a Global Presence Alliance member it has become the No. 1 Microsoft Surface Hub authorized reseller in Canada. Meanwhile, it has built up its in-house IT expertise to create a comfort level selling to its customers’ tech decision-making IT professionals. The kicker, of course, is that as a result of all of this it’s able to sell more service —profitably.
So why sell? It wasn’t without some trepidation, Faber acknowledges.
The prolific consolidation happing in the integration industry is obvious. Sharp’s Audio Visual has been among the many firms in the give-or-take $50 million revenue range that has been sought by investors. “I’ve been approached millions of times by different investment bankers,” Faber quipped.
He said it was after being approached around January 2017 by an investor that he actually “felt like I can work with and trust” that he really started to think about it. “It was about timing and opportunity and providing a much better customer experience for our customers that we simply couldn’t do on our own as a smaller organization.”
It was also about providing a better employment opportunity, he said. “Again, as a smaller organization we simply couldn’t provide things that a much larger organization could provide.”
Future of Sharp’s Audio Visual Employees, Executives
The bottom line when it comes to how AVI-SPL, which already had four locations in Canada, acquiring Sharp’s AV and its eight Canadian locations will affect employees is that it’s too soon to tell.
There are some redundancies when it comes to regions serviced with physical locations. However, it’s “way too early to even opine about that,” Faber said.
We do know that AVI-SPL Canada will be set up in two regions: Eastern Canada and Western Canada. Koechlin will oversee the Eastern region and Faber will take the Western region. However, that management strategy doesn’t create separate entities. “We’ll make sure we have one AVI-SPL Canada,” Koechlin said.
Otherwise, and for AVI-SPL Canada and former Sharp’s Audio Visual employees, Faber said, “it’s business as usual and customer focused.”