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3 Reasons Russound’s Colorado vNet Acquisition is Smart
Then Russound, the knight-in-shining-armor, swooped in and saved the day. It's compelling, but is it a good move by Russound?
I think so. Here are three reasons:
950 Dealers — Of Colorado vNet's 950 dealers, only 200 also sell Russound products. The acquisition effectively puts Russound in front of 750 new dealers.
Russound, which launched its no-new-wires Collage multiroom audio, video surveillance and intercom solution at CEDIA Expo 2009, can use the expanded network.
Many of those 750 dealers probably don't have strong allegiances to other multiroom audio providers, presenting Russound with a big growth opportunity.
Instant Control — Russound is now an automation company. Notice this quote from Russound CEO Charlie Porritt:
"One of Russound's goals has been to offer control solutions for security, lighting and thermostats. This acquisition immediately gives us access to offering home control through a company that we will own and control, and the ability to merge some of that control technology into Russound products."
Picking up a legitimate control manufacturer — Colorado vNet has demonstrated significant sales momentum during the past year, even amid a poor economy — is much easier than starting from scratch.
Why the %$&* Not? — Financial details of the transaction weren't revealed, but I'm guessing Russound got a pretty good deal on Colorado vNet, which was basically out of business.
Colorado vNet's 950 dealers alone make it worth the gamble.
Russound also earns some good PR since it essentially saved a company that is very important to the Loveland, Colo. community. Commenting on the $500,000 Colorado vNet received from the community, Porritt says:
"We are pleased to announce that we will honor the ongoing commitment to the town of Loveland and building a community there."
As part of that agreement, Loveland waived $10,000 in taxes and fees. It stipulates that if by the end of 2011 Colorado vNet employes 350 full-time employees, Loveland will fork over another $195,000.
It's not clear how personnel issues will shake out after the acquisition. Porritt says no specific decisions have been made about retaining individuals, including Colorado vNet CEO Bill Beierwaltes.
I say it's a good move by Russound. What do you think?
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Article Topics
Blogs · Mergers and Acquisitions · Control Systems · Distributed Audio · Speakers · Mergers And Acquisitions ·About the Author
4 Comments (displayed in order by date/time)
What makes you believe that the 950 number is real? PR is PR. You can say whatever you want to. Colorado VNet was doing great this year but they still folded. To assume that there are 750 dealers that Russound can now target for their products is nuts. Anyone can go down to ADI or go online and buy the over distributed product now. Why would a dealer suddenly start selling a product with no margin as compared to a limited distribution product like Vnet? These are 2 totally different lines.
The potential dealer leads are only a part of the windfall for Russound. Rmember these companies have not really been competing directly with each other product for product, but it is reasonable to assume that vnet customers were still buying custom products that vnet just didn’t offer such as amps speakers and selector V.C’s. so if you are ordering vnet product already and you now have access to russound SKU’s instead of going down to ADI and paying the distributors mark up there’s convenience and savings. Secondly By purchasing vnet they get access to technology assets (patents, engineering staff etc.) This would mean that russound can get a jump start into control area that they previously weren’t competing in.
How many times does a dealer put up with this? I for one will never go back to vnet!
The first time they went out of business I was in the middle of a large job and lost a large amount of $$$$$‘s plus had to pay $$$ to get support.
Ill stick with control4, they aren’t going anywhere!
John
Let’s hope Russound can survive the drag of a research intensive company like Colorado Vnet. They weren’t making it on their own, so we have to assume that Russound will make some cuts, in order to profitably absorb it into their organization. I wouldn’t assume anywhere close to 750 dealers will switch over to Russound, they’ve had the opportunity to do so before and for whatever reasons they have not done so. There’s no reason to beleive that just because Russound absorbed a financially defunct company that they will now magically love Russound product. On the bright side, it shows Russound is really serious about becoming a future star in the custom industry. Good luck to them, and all the individuals with the foresight to take a chance.