Cameras, action
Bob Lister’s personal recession-beating strategy is to take the plunge and make an acquisition. The direct, affable MD of Wigan-based CCTV installation specialist Video Tec-Zoom, who already has an MBO and two acquisitions under his belt, believes that the entrepreneurs who will make it through the downturn will be the ones who remain confident and determined about their strategic direction.
“I started thinking about making Video Tec recession-proof about nine months ago. I think it’s a mistake to batten down the hatches, cut staff and stem unnecessary costs. There are opportunities out there to pick up rival businesses that competitors won’t be willing to spend on,” Lister says. “It’s a question of holding your nerve and no deviating from a good plan.”
To this end, the straight-talking MD acquired rival Security Management Plus (SMP), a CCTV installation specialist serving schools and colleges. The acquisition of the £1 million-turnover Staffordshire venture last month, for an undisclosed six-figure sum, expands the company’s geographic scope but, more importantly, adds Lister, gives Video Tec access to the growing market of school security.
“With the recession looming, I wanted to get the business into a position of stability – as recession-proof as I could possibly make it. SMP was an attractive target because schools and colleges aren’t likely to go out of business any time soon. The company has now acquired a captive client base of 300-plus educational establishments,” Lister notes.
Funded by The Royal Bank of Scotland (RBS), the bolt-on acquisition is forecast to increase Video Tec-Zoom’s turnover to more than £5.5 million next year. Since taking the reins at SMP, Lister and his team have succeeded in winning three new contracts, each worth over £100,000.
“It was a terrific acquisition because it makes strategic sense to enter a market that is virtually recession-proof, with a strong customer base and no bad debt,” says Melanie Leather, company secretary.
Although unpopular with teachers, CCTV surveillance is used in most schools and colleges to discourage violence and vandalism. “The closed-circuit TV market in this country is one of the largest in the world. We are now moving on from analogue systems into an era of IP-based products. The three new contracts we won recently were for IP-based systems. Schools will install these systems and continually add to them,” Lister predicts.
Another crucial segment of Lister’s recession-busting strategy is to place greater emphasis on improving installation service levels for commercial and industrial businesses. The biggest industry problem, Lister says, involves competitors that sacrifice service and maintenance for higher volumes of installation: “We aim to increase service levels and ensure greater focus on maintenance for existing clients, which include retailers, commercial and industrial sites and manufacturing plants.”
Deal debut
It is almost three years since Lister completed the first stage of his corporate strategy to expand the customer base of Video Tec, the business he co-founded in 1995, through acquisitions. In March 2006, then Preston-based, Video Tec took over Wigan rival Zoom Group for an undisclosed six-figure sum. The deal concluded a two-year search for what Lister describes as the “right target”.
“The only way you can build a business in our industry is to grow organically and employ more sales staff, or to look for an acquisition in the market. While an acquisition can be expensive, it generally tends to work out more cost-effective further down the line, as you inherit a greater number of customers.”
With offices in Wigan and Newcastle upon Tyne, Zoom extended the acquirer’s regional presence to the North East. The deal also swelled Video Tec’s workforce from 20 to 51, and provided high-profile clients, such as JD Wetherspoon, Phoenix Medical Group and Vauxhall Motors.
Post-deal dilemmas
Although the acquisition was completed swiftly, post-deal integration issues began to emerge almost immediately, as Lister tried to manage the two CCTV ventures as independent entities.
“I wanted to trade the businesses separately, but it became apparent within the first few months that we needed to combine resources and bring the businesses together under one roof, recalls Lister.
“Running them separately was hard work because I felt that the left hand didn’t know what the right was doing. Finally, I closed the two separate offices and relocated to new premises at Standish – halfway between Preston and Wigan, to hold on to staff.”
Leather adds: “When the companies traded separately there was constant duplication of work and it was difficult to see the bigger picture. Since we moved to this office, we haven’t looked back. It really eroded the ‘them and us’ mentality, as everyone started working as a team.”
Post-Zoom, Lister swore he would never make another acquisition: “At times, it was painful; staff uncertainty and skeletons in the cupboards financially. This time we made sure we had the full picture.”
In 2006, just before taking the M&A plunge with Zoom, Lister anticipated that he would need two years to consolidate the two security providers. These days he is more optimistic and confident that Video Tec and SMP can be integrated quickly: “Knowing what we know now, after the Zoom deal, I feel that we’re looking at 12 to 18 months to bring on board SMP.
“This time we’ve tackled integration in a different way – we’ve not made the same mistake twice.”
SMP’s six staff report into the Standish office. The MD has also chosen to take a different approach with his advisers: “From the outset, we agreed capped fees with our financial and legal people because the fees for the first acquisition were 40 per cent more than we actually allowed for.”
Video Tec was advised by partner Robert Loveday of law firm Lockett Loveday McMahon during the MBO and subsequent acquisitions. Ian Johnson, senior partner at Wallwork Nelson & Johnson, provided financial expertise on the two deals.
Loveday, who has worked with Lister over a number of years on his broader corporate strategy of consolidating the business through cautious growth, says: “It was a straightforward transaction that was done, interestingly, against a backdrop of perception that deals aren’t that easy to do at the moment.
“Bob takes his time to find a business, but once he decides to make an acquisition, he just gets on with it,” Loveday notes.
Funding the deal
Finding finance for acquisitions has never been a problem for Lister. The ambitious MD secured a three-year debt package from RBS for the Zoom deal, making accelerated payments that would leave him clearing the debt six months early. “This stood us in good stead with the bank for the SMP acquisition,” he says. Leather adds to this that the company is on track to shorten the five-year funding period for this latest transaction.
Oliver Burton, associate director, Structured Debt Solutions at RBS, says: “Bob and the rest of the management team really impressed us with their plans to grow the business.”
Lister has come a long way since leading the MBO of Video Tec in 2004. He says he never imagined that his corporate strategy would encompass several acquisitions.
“I didn’t see it coming, but if I’m honest I’m quite getting into it.
“It’s just one of those things: you can stand still and tick along forever, but it’s all about opportunity.”