Mergers and acquisitions will rise, but small and specialised players still have a role

Tim Kridel discusses mergers and acquisitions in the pro AV market with Peter Hansen, economic analyst, AVIXA.

The impact of coronavirus, IT giants and pressure from multinationals are all up for discussion to discover how company consolidation looks set to continue across the AV industry for the next few years. 

TK: What business and marketplace factors do you think are motivating these mergers and acquisitions? 

PH: There are lots of motivations.  Each case has their own.  Two top reasons I would highlight are adding capabilities, like Spinitar adding Drake Systems Group to add the healthcare market and to meet the interconnected, global nature of the economy at large. Huge multinational companies often find it easier to work with one single partner for multiple AV integration projects across borders and across capability types. Size can be an advantage when it means you can install interconnected systems to the same standards at the same time all over. And if you can help out on their corporate events too, even better.

TK: Will Covid-19’s impact on pro AV and the global economy lead to more M&A, such as distress sales?

PH: Recessions generally cause a major drop in the total volume of money spent on mergers and acquisitions. This happens because companies are worth less and because less capital is available to finance major loans. However, recessions can be a good time to buy. Companies with sufficient capital have less competition and may be able to find bargains among companies in industries who are temporarily repressed like live events. It total, I don’t think you will see as many blockbuster mergers over the next 12 months, but you’ll still see a stream of smaller deals.

TK: How does M&A affect multi-national alliances such as PSNI?

PH: It’s easy to be afraid that the rise of large integrators and such will negate the need for smaller companies and their cooperative groups.  We’ve looked at end user preferences carefully though, and the data strongly suggest small AV companies will continue to prosper (at least once global health and the economy recover!). End users tell us that things like customer service and customisation are often more important than factors like cost, which keeps the playing field level across company sizes.  End users also report turning down bids because they think the bidder is too large for the project.  Smaller companies—as long as they stay agile and smart—will continue to have a major role in the AV world.  

And as for organisations like PSNI, they will continue to have a role in coordinating partnerships and getting bulk discounts for their members. You could see some of their membership being chipped away as it’s acquired, but you could also see the importance of such organisations increasing as the difference in buying power of the largest AV companies and small, unaffiliated AV companies grows.

TK: Could M&A include AV firms with IT firms?

PH: Yes, but less than you might think.  Being great at AV requires so much expertise and capability that it doesn’t leave a lot of room to also be great at everything IT entails.  Obviously, there’s a very blurry line between the two domains, but it seems like companies are usually finding it best to specialise in one and do it as well as possible rather than trying to do only an okay job on both.  Anecdotally, companies tell us that they have great success with partnerships where the two entities cooperate without combining.  So, while it does intuitively seem like an obvious pairing—you will certainly see at least some such M&A deals—there may be less of a business proposition than expected.

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