AVI Systems Joins the GPA

The News

On April 22nd, 2020, the news hit the street that AVI Systems has become the Global Presence Alliance’s (GPA’s) Regional Business Unit for the United States.  This deal was just signed off on Monday, so the ink is still fresh on this one.

Looking back to February 2020

This story actually begins a few months ago in early February when AVI-SPL and Whitlock announced plans to merge. (see our Research Note from February 5, 2020 on this transaction)

Well, technically speaking, Marlin Equity Partners (the company that owned a majority investment in Whitlock at the time) declared its intention to acquire AVI-SPL and then combine the two companies into a single entity.

The AVI-SPL / Whitlock deal officially closed on April 7, 2020.

When this pending merger was first announced, the analysts at Recon Research (RR) gave it an overall thumbs-up because of the obvious efficiencies that could be gained by combining these organizations into one.  However, we remained skeptical about whether AVI-SPL / Whitlock could retain its position within the GPA.

Excerpt from our February 5, 2020 research note …

Whitlock is an anchor player in the GPA, owing at least in part to the large size of the US market (Whitlock’s GPA territory) and the many GPA customer projects that include at least some US locations.  The question is whether Whitlock can retain its membership in the GPA after the merger.  The short answer – maybe, but it would be very difficult.  There’s just too much territorial overlap. 

It turns out our skepticism was spot on.

According to the GPA, “We spent quite a bit of time working on whether there was a pathway forward with AVI-SPL.  It turned out there was not.”

AVI Systems Takes the Ball

Enter AVI Systems – stage left (well at least virtual stage left given the current Covid-19 lockdown).

For those of you who don’t know, AVI Systems is a large AV system integrator that was founded in 1974 and is headquartered in Minnesota, USA.  The company employs just over 700 people and generated $276M in revenue in 2019.

Notably, AVI Systems is a 100% employee owned (ESOP) company.  Yes – the employees own the company, not the founder(s) or external investors.  In addition, AVI Systems is totally transparent with its financials.  In fact, on its website the company invites people to download its financial information.

According to AVI Systems’ CEO Jeff Stoebner, “We have integrated systems in 34 countries.  Not bad for a company without an outward global strategy.  But we’ve known for 2 years now that we have to have a better international strategy.”

Stoebner explained that two months ago, he realized that there would be a shift – and they went after it.  So he reached out to the GPA, and the due diligence process began.

GPA Managing Director Byron Tarry explained, “we worked with Jeff and his team for 6 – 7 weeks of due diligence and came out of that with a sense of being very impressed with their organization.”

And the rest is history.  AVI-SPL and Whitlock are out of the GPA, and AVI Systems is in.

Recon Research’s Take

Although we respect everyone involved, we didn’t expect the GPA and AVI-SPL to work out their differences.  So we were not surprised to learn that a new US GPA partner was pending.

A few months ago, we did a back-of-the-napkin exercise to determine which US-based companies might take Whitlock’s place.  The requirements were simple — significant size (revenue, headcount, etc.) and a limited (if any) global footprint.  Within seconds we landed on AVI Systems.

Quite frankly, AVI Systems fits this role like a glove.

For the GPA, AVI Systems brings a significant and respected US presence.  In addition, AVI Systems brings its friendly (mid-Western-style) and open attitude and way of doing business.  We know the GPA well and appreciate how open its member organizations (they call them Regional Business Units) are with each other.  This matches AVI Systems’ way of working to a tee.

For AVI Systems, joining the GPA gives it a pathway to the rest of the world without having to expand its physical footprint or hire additional staff.

The last open item is what will happen to the GPA customers being serviced by Whitlock?  This one will have to be answered on a customer-by-customer basis.

Obviously the customers decide who they want to work with.  And clearly the GPA does not want to disrupt existing contracts or lose GPA customers as a part of this transition.  But AVI-SPL / Whitlock clearly doesn’t want to give up its customers to competing AV integrators.  However, all parties have agreed that the customers will come first during this transition.  In other words, this one will play out slowly over the next few months or even years.

Summary

Whitlock was an exceptional GPA partner.  They invested time, money, and perhaps most importantly vision into the organization.

We know AVI Systems well and expect it to fit in well with the culture and mindset of the GPA.

The transition period is likely to be challenging and perhaps a bit painful for everyone involved, but quoting JFK, “Change is the law of life.”  And so it goes.

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