Electrograph Buys Two Players As Part Of Display Distributor Acquisition Binge

The Hauppauge, N.Y.-based distributor acquired ActiveLight and CineLight, both based in Poulsbo, Wash., from Powder Hill Group, for an undisclosed sum. The two companies have combined sales of $100 million, serving some 2,000 VARs. ActiveLight, the larger of the two, focuses on selling display solutions to VARs in the professional, commercial and high end consumer markets. CineLight focuses on advanced home theater technologies.

The acquisition is the first deal since Alan Marc Smith, the former CEO of speciality distributor Westcon, took the helm as CEO of Electrograph nearly a year ago. Smith and Electrograph President Sam Taylor teamed with Caxton Iseman Capital last August as part of a bid to grow Electrograph.

Smith said that he and Taylor are now eyeing other acquisition targets and intend to complete two to four additional acquisitions this year. "This is just the first deal," said Smith. "We are now a $300 million run rate company. What we have done is push the first snowball down the hill as part of our goal of becoming a one billion dollar display technology solutions distributor."

In addition to the acquisitions, Smith said Eletrograph is seeing "organic" annual sales growth in the range of 20 percent to 30 percent. He said the display technology solutions business is crying out for a market leader distributor to bring the scale and broad services necessary to provide VARs with greater display services including solutions field support. For example, he noted that currently Electrograph has 24 field solutions reps to assist partners in the U.S. and aims to grow that to at least 50 over the next year.

Smith compared the opportunity in the display solutions business to the one he saw in the networking business when he grew Westcon with a series of acquisitions. He said vendors are looking for a dominant distributor in the display solutions business to help grow the market.

"The display solutions business is poised to grow the same way as the networking market, which started with broadline distributors and a couple of small players. "The goal is to become the first billion dollar player as the market matures. We will continue to pursue acquisitions for the purpose of expanding our platform and delivering a large-scale value-added specialty distributor for the display solutions market."

Smith said there was less than 10 percent VAR customer overlap between Electrograph and ActiveLight and CineLight. Furthermore, he said, the deal strengthens Electrograph's market presence on the West Coast since both ActiveLight and CineLight are based in Washington.

Chris Karcher, founder and president of Karcher Group, a 13-year-old Chantilly, Va,.professional audio-video design-build firm, said the deal represents an outstanding opportunity for Electrograph to dominate the display solutions business, providing VARs with better pricing. "We are in the professional audio visual side of the business and ActiveLight is a real up and comer," said Karcher. "This makes Electrograph the dominant force in the professional audio visual market.

"This deal is great for VARs," he said . "There is a lot of dog fighting that goes on beween distributors and this gives Electrograph a much stronger negotiating position with manufacturers that should result in better pricing for VARs. When you to go a manufacturer and say you want 10, 000 units this year instead of 5,000, you are going to be able to command a much stronger price. Electrograph is going to have greater bargaining power with manufacturers."

Russell Short, vice president and general manager of CineLight, will remain with the company and assume a senior-level role within Electrograph&'s operations.

Herb Myers, founder of both ActiveLight and Cinelight, will continue to lead The Powder Hill Group, Boxlight and The Digital Signage Group, as well as various real estate interests. Brad Gleeson, also a founder of ActiveLight and CineLight, will pursue other business interests.

Smith said his message to distributors in the display solutions business is that he and Taylor are actively looking at acquisition targets. At the same time, he vowed to bring additional value-added services to VARs. "Our message for VARs is that by having more scale, size and scope we will be to bring more products, solutions, inventory and logistics to VAR customers. If we can't make our VARs more successful by dealing with distribution than dealing directly with a vendor then we are going to fail. Our goal is to step up to that role for VARs."