DALLAS — With private investment firm Brazos Private Equity Partners LLC having completed deals to acquire Tri-Ed Distribution and Northern Video Systems, principals at the companies say further growth by acquisition can be expected as they maneuver to become a leading distribution partner for independent installing security contractors and other resellers.
The two companies will be combined and operate as Tri-Northern Security Distribution Inc., led by Steve Roth, who has served as president and CEO of Woodbury, N.Y.-based Tri-Ed since 2005. The financial commitment of Brazos — a Dallas-based firm that manages $1.4 billion of equity capital — and the highly fragmented distribution landscape provide the opportunity for further expansion, Roth tells SSI.
“We selected Brazos because they have a management style that is compatible with our plans to go forward,” Roth says. “As the right opportunities make themselves available we want to have the war chest to be able to go forward.”
The basis for ultimately doing the deal with Brazos first began with Tri-Ed commencing a process last summer to look at finding a private equity partner to finance growth in its own business, according to John Mack, executive vice president and co-head of investment banking at Imperial Capital, which served as exclusive financial advisor to Tri-Ed and also advised Northern Video.
“As part of looking at growth opportunities, we initiated a discussion with Northern Video about the idea of a possible combination of the two companies. When it became apparent there was a lot of interest from the two companies, then we looked at putting together a financing that we could do with a private equity group at the same time,” says Mack, who advised Roth’s group that acquired Tri-Ed from Tyco in 2005.
After conducting conversations “with a select group” of private investors, Mack says, the deal-making with Brazos began in earnest in December and concluded with the acquisitions consummated in mid-March. Terms of the deals were not released.
The merger combines Tri-Ed’s 38 branch offices with Northern Video’s three locations, along with its much revered centralized business model for shipping mostly video surveillance products throughout the United States.
“This really puts Northern in a position to be a complete security solutions provider — a one-stop shop — with branches and convenience that we haven’t had in the past,” says Mark Haney, president and CEO of Rocklin, Calif.-based Northern Video, who will serve as president of the combined company. “We believe our customers and our manufacturers are going to love this.”
Combining the two companies was a “smart move” and a necessary one if Tri-Ed hoped to compete as a dominant player with ADI and an increasingly competitive field of distributors, says Sandy Jones, president of Sandra Jones & Co.
“Now with Anixter, Graybar, and all the IT distribution companies moving into our marketplace, to be a clear No. 2, this is really a move that had to be made to become a market leader,” Jones says. “They have made the investment to become, and the intention certainly is to become, a market leader. They didn’t put all that money into it to be No. 4.”
Carving out a middle ground in distribution is not a sustainable business model, so further expansion for the combined company can be expected, Jones says. “It is very difficult to be in the middle today, especially when you are using somebody else’s money,” she says. “You have too much overhead to be agile and not large enough to be national. You can be a strong local or regional player, or you have to try to be national.”
Roth says among his immediate tasks is integrating a unified computer platform and a singular customer relationship management tool that will allow the companies to leverage each other’s strengths.
“We are comfortable and confident that we will have this business integrated in four to six months and be well on our way to really being a powerhouse,” says Roth.