Transition Is the Name of the Game

Our team just returned from Las Vegas after attending the 2016 InfoComm Show and one word comes to mind: “transition”. We met with dozens of companies at this important annual event for the Commercial A/V Industry, and we’d like to share some highlights with you.

Hardware manufacturers and software developers are in transition

Being a purely hardware or software provider leaves companies susceptible to price competition and makes it difficult to be indispensable to the customer. Customers are increasingly looking for complete systems and solutions as opposed to discrete components. As a result, many companies are looking to add capabilities that will allow them to provide a complete package offering to customers. This has been apparent in several recent transactions in the sector, and was a major theme of our discussion regarding M&A strategies.

The integrator world is in transition

“Own the customer” was another recurring theme of our conversations. Integrators with specific industry knowledge or technological capabilities are becoming increasingly valuable in the ecosystem. It’s no wonder two of the top five SCN A/V integrators have been acquired by PE firms in the last 12 months. We anticipate further consolidation.

Technologies are in transition

Innovation and entrepreneurship are hallmarks of the A/V industry, with many companies at InfoComm showcasing their latest technologies. Buzzwords like NITs, lumens, pixel pitch, A/V over IP, zero latency, streaming, and drones were all flying through the Central and North halls, with manufacturers striving to maintain important differentiation from their competitors. Staying at the forefront of innovation requires capital, placing pressure on smaller operators to sell out to larger players, or seeking investors to fuel R&D efforts.

Buying decisions are in transition

The purchasing decision at the end-customer is transitioning, or is becoming less transparent and diluted such that there is no obvious buyer with ultimate decision making authority. As a result, manufacturers and integrators are enhancing their market reach by calling on architects, designers, consultants, A/V departments, and IT departments to ensure they are in the flow of sales opportunities. Scale becomes important as companies need to carry a larger salesforce and overhead. We expect this trend to drive M&A activity in the sector.

While this level of transition is no doubt a challenge to the attendees and exhibitors at InfoComm, it does bode well for increased M&A and capital raising activity and may actually enhance the value of your company.