• CEPro_logo_blue-new
  • TOPICS
      • News
        • People & Places
        • Product Briefs
      • Projects
      • Events
      • Control
        • Central Vac
        • Energy/Power
        • HVAC/IAQ
        • Interfaces/Devices
        • Lighting
        • Motorized Shades
        • Whole House Systems
      • Audio/Video
        • Amplifiers/Receivers
        • AV Accessories
        • AV Racks
        • Cabling
        • Displays
        • Furniture
        • Headphones
        • Home Theater
        • Media
        • Mounts/Lifts
        • Multiroom AV
        • Projectors/Screens
        • Speakers/Subwoofers
        • Wireless AV
      • Security
        • Access Control
        • Alarms/Sensors
        • Services/Platforms
        • Surveillance/Cameras
      • Business Support
        • Associations/Buying Groups
        • Cell Phone Boosters
        • Distributors/Reps
        • Operations
        • Recurring Revenue
        • Research
        • Sales/Marketing
        • Software Services
        • Tools/Testers
      • Networking
        • Cellular
        • Devices/Equipment
        • Wireless
        • Wired/Installation
      • Markets
        • Builders
        • Commercial
        • Design
        • Europe
        • Outdoors
        • Resimercial
        • Wellness
      • CE Pro Hub Pages
        • Bose
        • Inside Sound United
        • Nice
        • Savant
  • PRODUCTS
  • RESOURCES
    • Reports/Downloads
    • Buyer’s Guide
    • Webcasts
    • Podcasts
    • Digital Edition
    • CE Pro-iQ
  • SUBSCRIBE
    • CEDIA SHOW UPDATES
    • CEPRO PRINT EDITION
    • CEPRO DIGITAL EDITION
    • CEPRO NEWSLETTERS
  • DISCOVER
    • CEDIA Expo
      • September 29 – October 1
        Dallas, TX
      • VISIT SITE
    • KBIS
      • February 8 – 10
        Orlando, FL
      • VISIT SITE
    • Total Tech Summit
      • October 26 – 28
        Orlando, FL
      • VISIT SITE
    • Commercial Integrator
      • VISIT SITE
    • Security Sales
      • VISIT SITE
    • Tech Decisions
      • VISIT SITE
    • Campus Safety
      • VISIT SITE
    • Design Well
      • VISIT SITE
    • KBB Online
      • VISIT SITE
    • AV-iQ
      • VISIT SITE
    • CE Pro-iQ
      • VISIT SITE
  • Search
  • TOPICS
    • News
      • People & Places
      • Product Briefs
    • Projects
    • Events
    • Control
      • Central Vac
      • Energy/Power
      • HVAC/IAQ
      • Interfaces/Devices
      • Lighting
      • Motorized Shades
      • Whole House Systems
    • Audio/Video
      • Amplifiers/Receivers
      • AV Accessories
      • AV Racks
      • Cabling
      • Displays
      • Furniture
      • Headphones
      • Home Theater
      • Media
      • Mounts/Lifts
      • Multiroom AV
      • Projectors/Screens
      • Speakers/Subwoofers
      • Wireless AV
    • Security
      • Access Control
      • Alarms/Sensors
      • Services/Platforms
      • Surveillance/Cameras
    • Business Support
      • Associations/Buying Groups
      • Cell Phone Boosters
      • Distributors/Reps
      • Operations
      • Recurring Revenue
      • Research
      • Sales/Marketing
      • Software Services
      • Tools/Testers
    • Networking
      • Cellular
      • Devices/Equipment
      • Wireless
      • Wired/Installation
    • Markets
      • Builders
      • Commercial
      • Design
      • Europe
      • Outdoors
      • Resimercial
      • Wellness
    • CE Pro Hub Pages
      • Bose
      • Inside Sound United
      • Nice
      • Savant
  • PRODUCTS
  • RESOURCES
    • Reports/Downloads
    • Buyer’s Guide
    • Webcasts
    • Podcasts
    • Digital Edition
    • CE Pro-IQ
  • SUBSCRIBE
    • CEPRO PRINT EDITION
    • CEPRO DIGITAL EDITION
    • CEPRO NEWSLETTERS
    • CEDIA SHOW UPDATES
  • DISCOVER
    • Cedia Expo
      VISIT SITE
    • Commercial Integrator
      VISIT SITE
    • Security Sales
      VISIT SITE
    • Tech Decisions
      VISIT SITE
    • Campus Safety
      VISIT SITE
    • Design Well
      VISIT SITE
    • Total Tech Summit
      VISIT SITE
    • KBB Online
      VISIT SITE
    • AV-iQ
    • CE Pro-iQ
M
POPULAR SEARCHES
News
Projects
Control
Audio Video
Security
Business Support
Markets
SUBSCRIBE CEDIA EXPO CEPro-iQ
Business Support | Operations
October 26, 2021

Is Now the Time to Sell Your AV Integration Business?

Buying opportunities exist in the custom electronics industry for the first time in decades, with 3X to 5X EBITDA multiples being paid for solid companies.
Jason Knott  

(Image Credit: nespix/stock.adobe.com)

Article:
Business Support | Operations
October 26, 2021

Is Now the Time to Sell Your AV Integration Business?

If the “buy low, sell high” mantra of stock market success holds true for the custom electronics industry, does that mean now is the right time for integrators to consider selling their company as part of an exit strategy? 

Indeed, it seems prices are as high as they have ever been in so many facets of business. So is the value of a custom installation business at its peak also? High valuations certainly seem to be the case in the housing market currently, where supply and demand are so unequal that prices have skyrocketed to astronomical heights. 

Likewise, high prices are currently being paid for many other goods and services, from automobiles to food to gasoline. Where does that leave your business valuation? 

More Possibilities for Becoming a Seller Now 

For many integrators, the thought of selling the company that you built from the ground up with a lot of blood, sweat and tears is something you would never even consider. And in fact, according to CE Pro data, 52% of integrators say they do not have any sort of exit strategy plan in place. Another 21% of integrators report they plan to sell or give the business to family members or partners when they are ready to hang up their toolbelt. Only one in five CE pros reports they plan to find an outside buyer for their custom installation company. 

However, that still leaves nearly half of integrators thinking about cashing out in some fashion. The majority of integrators got into this industry because they love it. Indeed, many are simply AV enthusiasts or techies who probably never intended to build a substantial custom installation company that would someday become sellable asset. 

But for many integration companies, the prospect of selling your company that has built value over the years until it has become a highly prized resource that can be sold for a profit is now a reality versus a myth. Or is it? 

According to CE Pro data, 52% of integrators say they do not have any sort of exit strategy plan in place. Another 21% plan to sell or give the business to family members or partners.

For what seems like a decade or more, there were virtually no buyouts of custom integration companies. Then in 2008, Best Buy acquired AudioVisions in Southern California. The thought at the time was that big buyout was the first salvo for major retail players like Best Buy, Circuit City and Tweeter to start gobbling up some of the leading integration companies. But it didn’t happen. Why? 

First, most integration companies simply aren’t large enough to attract possible suitors. In a panel discussion at the first-ever Total Tech Summit (which was dubbed the CE Pro Valuation Summit back in November 2007), the national players declared that custom integration companies needed to be a minimum of $10 million in gross income before they could even be on the radar for acquisition. 

Second, the housing crisis hit soon afterwards, spiraling the revenues for the average custom installation firm by 51% in 2009. That difficult economic recession might have actually been a stroke of luck for some integrators, especially if they had been acquired by Tweeter or Circuit City, neither of which survived the turmoil. 

Fast forward to 2019 for the first time in many years, the industry has experienced several mergers and acquisitions led by AVDG/Guitar Center and Bravas, two players that are looking to establish national footprints for this industry long known for its local roots. In the past several years, Bravas has expanded well beyond its original 15 companies with several organic launches in new cities, as well as acquisitions, including:

  • ProStream Digital in the Dallas/Fort Worth market to join the teams from AV Innovation, Home Theater Technologies and Smart Systems as part of Bravas DFW.
  • Bravas Philadelphia added the AV Environments team to its existing Audio Video Hi-fi Sales group.
  • The acquisition of Twilight Solutions in Walnut Creek, Calif., to join its Bravas San Francisco location with The Homeworks Group Bringing in Residential Systems in the Denver area for Bravas Colorado.

Meanwhile, Guitar Center’s AVDG Group has been quiet recently, which is to be expected given its parent company was forced to declare Chapter 11 bankruptcy as a result of the pandemic’s hit on its retail store foot traffic. But prior to that time, the company had been active, acquiring AVDG in the Bay Area, TVTI in Chicago, and Maverick Integration in New Hampshire. The company has also started two other branches organically. 

Add to those other one-off mergers and acquisitions have taken place in across the country, such as Desert Valley Audio Video in Scottsdale, Ariz., making the move into California with the buyout of Audio Concepts, and ETC in West Palm Beach, Fla., changing hands under new ownership. 

The bottom line is that for the first time in many years, there is vibrant M&A activity in the residential integration space.

What Are Buyers Looking For? 

According to Doug Carnell, vice president of business solutions at AVDG’s parent company Guitar Center, one of the keys to being on the radar for acquisition is a unique market angle or area of expertise. For example, the original acquisition of AVDG by Guitar Center was due to the company’s expertise in commercial installations. TVTI is proficient in the MDU space, while Maverick Integration has developed honed operational processes that build strong margin. 

“We’re looking for companies that are already running well, that are already profitable and have the reputation [as leaders in their markets].” 

Ryan Anderson, president, Bravas

“Overall, our goal in looking at a company is really about understanding the business, understanding the ownership of that business and where their backgrounds are, what we think that can play it out for us in the long term, and what features and qualities they have versus what we already have,” he said speaking during a recent webcast held by the Home Technology Association (HTA). 

Ryan Anderson, president at Bravas, says profitability and reputation are the two key criteria he looks for in a prospective acquisition. 

“We don’t want fixer-uppers or companies that are damaged and broken that require us to come in and change everything and fix everything,” he says. “We’re looking for companies that are already running well, that are already profitable and have the reputation.” 

Anderson says the ideal target is one in which the company owner is still highly engaged in the business and wants to remain with the business even after the acquisition. That CE pro would remain working with sales, design, installation and operations, but free up back-office functions like HR and accounting. 

Carnell agrees, noting, “If you’re in this business because it’s a hobby and the P&L is not important to you, then selling your business is probably not that important to you either.” 

He says CE pros that are building “lifestyle businesses and then think somebody out there is going to offer them a big check for the business … it’s just not going to happen.” 

Ensuring Ease of Transition, Accounting Up to Speed 

“If I’m buying your company, it’s because we’re interested in growing a marketplace; it’s far easier to do that than to create an organic workplace,” says Doug Carnell, vice president of business solutions at AVDG’s parent company Guitar Center.

Carnell also looks for companies in which the owner is not seeking to ride off into the sunset after the buyout, but plans to stay and help build the business with the AVDG leadership. 

“If I’m going to acquire a business and the founder wants to retire, that business has little or no hope to succeed unless that business has really thought about the post-acquisition,” he says. “It’s got to be a win-win for both the owner and us as a company. If I’m buying your company, it’s because we’re interested in growing a marketplace; it’s far easier to do that than to create an organic workplace. 

“To the same degree, I need you as a founder to set up your business in a way that I can be successful in that purchase as well. I’m going to pay a higher multiple when I see the transition is just as easy for me as it is for you as the founder to succeed,” he notes. 

Another important element for integrators looking for an exit strategy is to clean up the books beforehand. The auditing process during due diligence will flag any revenues and expenses that are not properly assigned. 

One solid piece of advice from David Welles of TVTI, which was purchased by ADVG, is for integrators not to think too much about selling their company. “If you are a business owner, don’t worry about who might want to buy you,” he says. 

“If you are successful, the opportunity will come to you eventually. If your business is good, somebody is going to want to purchase you.”

post

If you enjoyed this article and want to receive more valuable industry content like this, click here to sign up for our digital newsletters!

ABOUT THE AUTHOR

Jason Knott
Follow
Jason Knott:
Jason Knott is Chief Content Officer for Emerald's Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California.
View Jason Knott's complete profile

ARTICLE TOPICS

Business Support • Operations

ARTICLE TAGS

Best Buy • Bravas • Guitar Center • Home Technology Association

SHARE

Share On Facebook
Share On Twitter
Share On Linkedin
Share On Whatsapp
Share Via Email
Copy URL
← Previous Article Next Article →
Article Audio/VideoAV AccessoriesProductsResimercial

ALLCAST Simplifies Work From Home Setups: CE Pro Review

$499 ALLCAST Video Conference, Webinar and Podcast System from American Recorder Technologies is easy option to offer your WFH clients.
Article BuildersBusiness SupportCablingControlDesignInterfaces/DevicesLightingMotorized ShadesOutdoorsSecuritySurveillance/CamerasWhole-House Systems

Here Are the Most Valuable Home Technology Upgrades to Offer Clients

Joe Borress of Tri Star Electric & Automation offers his thoughts on high-value home upgrades for integrators to focus on.
Article Audio/VideoAV AccessoriesProductsResimercial

ALLCAST Simplifies Work From Home Setups: CE Pro Review

$499 ALLCAST Video Conference, Webinar and Podcast System from American Recorder Technologies is easy option to offer your WFH clients.
Article DesignNewsWellness

ASID Releases Official Resource Guide for Senior Living Environments

New resource for building professionals structures itself along 8 guiding principles, of which include increasing senior autonomy, integrating wellness and elevating building systems.

SHOW NEWSLETTER

Sign Up

CE Pro

Subscribe Sign Up

Content Types

News
Products
Projects
Companies
Downloads
Webcasts
Podcasts
Events

Specials

CEDIA EXPO
CE Pro 100
CE Pro Summit
Awards Programs

Company Info

About
Contact Us
Customer Service
Media Solutions & Advertising

Subscribe

Magazine
Newsletters
Digital Edition

Connect

Twitter
Facebook
LinkedIn
YouTube
RSS Feed

Categories

AUDIO/VIDEO
AV Accessories
AV Racks
Amplifiers/Receivers
Cabling
Displays
Furniture
Mounts/Lifts
Multiroom AV
Projector Screens
Speakers/Subwoofers
Wireless AV
CONTROL
Central Vac
Energy/Power
Interfaces/Devices
HVAC/IAQ
Lighting
Motorized Shades
Whole-House Systems
NETWORKING
Cellular
Devices/Equipment
Wireless
Wiring/Installation
SECURITY
Access Control
Alarms/Sensors
Services/Platforms
Surveillance Cameras
BUSINESS SUPPORT
Associations/Buying Groups
Distributors/Reps
Operations
Recurring Revenue
Research
Sales/Marketing
Software/Services
Tools/Testers
MARKETS
Builders
Commercial
Design
Europe
Outdoors
Wellness
FOLLOW US ON
  • Follow
  • Follow
  • Follow
  • Follow
  • Follow
  • Follow

© 2023 Emerald X, LLC. All Rights Reserved.

  • ABOUT
  • CAREERS
  • TERMS OF USE
  • PRIVACY POLICY