Electrograph Becomes Largest Display Distributor As It Acquire ICG

Electrograph expects to announce a deal this week to acquire International Computer Graphics (ICG), a $275 million display distributor. The deal will essentially double Electrograph's revenue on an annualized basis and make it the nation's largest distributor of display products.

The acquisition is the next step in Smith's grand plan to grow Hauppauge, N.Y.-based Electrograph into one of the largest specialty distributors in the country. Piece by piece, Smith intends to build a display distribution dynamo.

Electrograph was a $150 million company when Smith teamed with private equity firm Caxton-Iseman Capital and Electrograph President Sam Taylor to acquire the company for $56 million in April 2005. His first step was to secure a larger revenue base for Electrograph, which he accomplished through acquisitions of ActiveLight and CineLight in February.

Smith then set about adding the next layer: a company that had a different customer and product segment that would complement Electrograph's. ICG was the perfect match. It puts Electrograph more than halfway to Smith's goal of turning it into a billion-dollar company.

Smith envisioned a $1 billion display-focused distributor in his head before he had even closed the deal to join Electrograph last year, said ICG President and CEO Mike Ahmar. "He had talked to me about joining forces to form one dominant player before that deal was even closed," he said. "Alan has a unique talent of putting things together. He's got a great history and a success record."

Smith's track record includes seven years at Westcon Group, which he helped grow to a $2 billion networking distributor. Smith compares the ICG acquisition to Westcon's buy of Comstor. "That cemented Westcon as the leading networking distributor. This cements us as the leading player in this space. It gives the company all the pieces it needs to accelerate organic growth and the ability to do acquisitions adding in specific pieces," Smith said.

Smith is convinced of the convergence between data and audio/video technologies, much as he was convinced that computers and phones would converge on one network while he was CEO of Westcon Group.

"You have multiple types of content—DVD, MP3, audio, digital video. You need a multimedia PC or server, but the display content is the viewer and user interface. It's the mechanism to bring it all together. I call it content convergence," Smith said.

"Now we're a $600 million machine. With a bigger infrastructure, we can look now at audio, speakers, cable, new components that are entering the market, such as HD-DVD and wireless, to make a complete solution," he said. "The question becomes, do we do it organically or through acquisitions?"

Vendor executives said they expect the merger to land them benefits and efficiencies with customers.

"To go to Electrograph for the display, but someone else for the A/V or cabling doesn't make sense. [Further expansion] is a logical step to complement the displays," said Jim Krodel, vice president of industrial sales at the Home Business Group of Pioneer Electronics.

"Our focus as a manufacturer is to provide strong product, but also on creating customer demand. We will work with [Electrograph] now to get that done more efficiently," said John Baisley, president of Panasonic Broadcast and Television Systems, a division of Panasonic Corp. of North America.

Solution providers said they expect a twofold benefit from the merger: first, better shipping and inventory choices through additional warehouses, and second, better margins with Electrograph's enhanced buying power with vendors.

"We buy from multiple distributors. If [Electrograph] can become a one-stop shop with attractive pricing, we would be more inclined to do business with limited distributors," said Chris Karcher, founder and president of Karcher Group, a solution provider based in Chantilly, Va., that specializes in audio/video.