Buying and building

London based integration firm Audio Visual Machines (AVM) has been on a continuous growth trajectory for the best part of a decade. Following its latest acquisition, InAVate spoke to Managing Director Edward Cook about the company’s growth and the AV market in general.

Edward, please give me some background about yourself and AVM.

I’ve been the MD of AVM for about 7 years. Before that my background was in IT services, where I helped to build up and sell an IT services business doing computer training, software development, IT recruitment – the whole range of services.

Since joining AVM, our mission has really been to grow as quickly as we can and we were also involved in a venture capital backed management buy-out at the end of September 2006.

How does the acquisition of AVE fit into that larger growth plan?

Our strategy at AVM is to focus very much on systems integration and service and the way we're doing that is through organic growth, but also through a buy and build programme which we’ve been on now for the last two or three years. The reason we went for AVE was that they are on a very similar strategy and they themselves have done very well over the last couple of years. A bit like AVM ten years ago, AVE a couple of years ago was a family business, which was doing ok but reasonably static at the £2 - £2.5m turn-over level. Then in the last couple of years, they brought in some new people and managed to jump their revenues up from £2.5m to £6m. When we looked at that we thought, Wow, they must have some really good people. They’ve got a great client base and they do much the same stuff as we do in terms of putting in complete AV solutions, primarily to the corporate market place, and then selling the maintenance and support on the back of that. Those are the areas we are interested in.

We looked at the key factors behind why we would do an acquisition. Those are the people, the client base and the service revenues – the repeating revenue. To us adding long term value to the business is all about winning client business and then retaining it. Our feeling is that it’s a bit like the hamster on the spinning wheel – if you’re doing all the installations and all your focus is on that, then it’s just a case of your sales people going out winning a job, coming back, going for another one. But there’s no long-term bank there. You may make reasonable profits on the work that you do, but as soon as you stop doing that you are in trouble. The way we see it is the maintenance base and the number of clients that have a good relationship with you and are prepared to keep using you year after year – that is the real value. To us it’s all about securing those relationships and retaining that business.

What will the acquisition of AVE do to your business size and turn over?

We ourselves were 90 people and doing a turn-over of £11m and AVE were 40 people with a £6m turn-over. Combined we’ll be 130 people with a £17m turn over. This is the biggest acquisition and growth we’ve done in one go.

What about the previous acquisitions you have made?

With the previous acquisitions they’ve all been for specific reasons. The most recent one was Metro, where we acquired the installation and service divisions of Metro Broadcast Ltd – that was a manpower and maintenance base acquisition. We were particularly interested in the client base that they had and the strong relations they had with them. As a result of that deal we had a lot of quite big clients come on board with us.

The reason we bought the Video Meeting Company in 2005 was for their expertise and their accreditation in the videoconferencing field. They were Polycom and Tandberg partners and did a lot of value add videoconferencing services, we were very keen to do more on that front and that’s now an important part of our business.

With AVE, it was a scale thing – it really jumps us up into the big league, it was also about the client relationships and one other thing that particularly appealed to us about AVE was their expertise in the digital signage space.

Is that an area of interest for you?

It’s something that, because of our focus in the city, we’ve not really done a lot of. That’s because we’ve not got a lot of retail clients. AVE has a good track record of doing some quite sizeable rollouts. Having that expertise and client base come on board immediately is a big plus point for us.

How equipped do you think AV companies are to compete with the IT guys in the city?

I think a key factor is scale and that is another main driver behind why we’re not happy to be just a reasonable sized player. We want to be the biggest and we want to be the market leader in the UK in terms of systems integration and service. We also understand that to pitch for the larger projects and the bigger support projects one has to have the company statistics behind you. You have to say you’ve got a big number of engineers, a lot of accreditation, a stable financial backbone to the company itself. Otherwise when the big contracts are handed out, the AV companies won’t stand a chance.

I very much see AV as following the same structural changes that IT did. IT went through this at least ten years ago and it’s only really hitting the AV industry now. What really happened in IT was that there were loads of one man bands who jumped up, because anyone who was vaguely technical thought, I can do this. AV has the same background. The AV industry as far as management and the typically AV company that’s out there hasn’t really moved on a great deal. IT moved, probably over a period of about ten years, from lots of small outfits to being a handful of seriously large, one-stop-shop IT service companies.

Do you think that AV is taking longer than IT to “grow up” and if so, why?

I think it is taking longer given the length of time the technology has been around, but that’s not all together surprising that IT consolidated before AV because it’s a much bigger market. In an office of 20 people you might have one plasma screen but you’ll have 20 PCs. It’s now happening that AV is having to consolidate to meet greater demand.

Another driver is the change in the point of contact at the customer. Five years ago our particular client was a facilities manager. Now it’s very much the case in the larger corporates that our clients are IT managers. These IT managers are used to dealing with big IT companies, with comprehensive service level agreements, with very competitive pricing, and that is what they expect from AV companies. A lot of clients are dipping their toes in the AV pond for the very first time. because they are IT people they don’t know a huge amount about AV. If they are faced with an IT services company that says "Yes I know you, I already deal with you, and yes by the way we do this all this AV stuff too so don’t worry about it.” As opposed to an AV company, which they’ve never heard of, is small, and has no real branding or financial backing. They are going to pick the IT services company every time. It’s our view then that we have to be as professional, as solid, as large as our IT services competitors, within reason. We’ve not trying to be IBM, and I think clients understand that, but we need to have the same ways of working and the same structures to compete against those guys.

Article Categories

Most Viewed