Home market ripe for picking

Monday, September 1, 2003

BOSTON - Four high-end home integration firms have banded together to form an installation company that will eventually blanket the major markets in North America and make inroads in an industry that company officials see as ripe for consolidation.

Led by funding arm and management company Bluefin Management, based here, the companies that make up Signature Media Group - Integrated Media Systems, Sterling, Va.; Progressive Audio, Columbus, Ohio; ProLine Integrated Systems, Highland Park, Ill. and Advanced Audio Design, Sarasota, Fla. - will merge their expertise in different sectors of the market and develop a standardized product and service offering under the new SMG brand.

“This industry is growing well into the double digits, but the geographic fragmentation is continuing and constraining it from having the critical mass and resources,” said Jim Monroe, chief executive officer of SMG and president of Bluefin Management. “All these companies are at a leading position in their market and I want to maintain that.”

With the assembly of these four companies, whose average installation hovers around $100,000, according to company officials, the growth only begins here. Over the next 24 to 36 months, SMG will bring into the fold a series of additional companies it has targeted to become part of the mix, with plans to end up in 20 to 30 of the major markets in North America, according to Andy Willcox, president of ProLine Integrated Systems.

“The plan is eventually to have a national service organization because we all strongly believe that the industry is headed more toward service and less toward an out of the box solution,” Willcox said. All four companies have been in operation between 10 and 20 years, he said.

Initially, each individual company will continue to operate essentially as it did before the merger, including retaining its name and local marketing presence, but some distinct advantages will be seen almost automatically, said Scott Ranney, president of Progressive Audio, such as product purchasing power from suppliers, cross training in different areas as well as other information sharing and networking. Owners of the founding companies have become stockholders in SMG, he said.

While so far only one of the principal companies has an established security component, integrating that piece into the SMG offering is an aspect that company management is eager to expand.

“We see security as a great growth opportunity, and it’s mixed within the group as to its strength and focus,” Monroe said. “We have that discipline (at Integrated Media Systems) so we are going to try to port it” to other areas of the company, he said.

Extending the security piece to other members of SMG and to the group’s total offering is a natural fit, said Tom Wells, president of Integrated Media Systems.

“We’d like to have the ability to present an integrated approach in every one of our markets,” Well said, but the company will do so more for the opportunity to present a “better end-product” rather than capture the recurring revenue. “That’s not our hot button,” he said.

Wells bought Virginia security installation firm Digital Security Inc. three years ago and integrated the employees and accounts into his business. While he doesn’t look at security as a “financial landmark, it completes the picture for us,” he said. Integrated Media uses Rapid Response for monitoring.

Principals of the founding company plan to meet on a semi-monthly basis to plan aspects of the roll out. Committees have been formed to discuss product, acquisitions, and such aspects as public relations and branding, Ranney said, with a lot of work being done via email and phone.

“This is a localized business, and the customers are in the surrounding neighborhoods where the companies have a branded reputation,” Monroe said. “They will continue to preserve their local brand until such time as we can spend time on the SMG brand.”

The company will continue to use a “decentralized operating structure” to reflect that local presence, he said.

How quickly the SMG brand is developed and adopted depends on the speed and success of the acquisitions and where they are located geographically, Monroe said.