Last week the big news in the custom home technology industry was the merger of six companies to form VIA International. While this type of merger is common in other industries as well as the manufacturing arm of the custom electronics industry, it has not been successfully completed at this level on the installation side.
Disclosure: I worked for one of the merged companies (Paragon Technology Group) from 2005-2009 but have not been involved in the merger or discussed it with any employees.
The most common question out there right now is “why would they want to do that?” Of course all the press releases mention increased levels of customer service and consistency of offerings for clients with multiple homes in various geographic markets. While this is true to a degree, let’s also consider that the companies are no longer giving money to another integration company when a client buys or builds a home in another market. They are also no longer put in a position of charging a premium to assemble and deploy a “travel team.” Bottom line: customer retention with decreased cost.
What are the other benefits not being discussed? Purchasing power, custom product lines, shared expenses and resources, and geographic diversification.
Five of the six companies are members of the HTSA buying group. By default, I assume the sixth company is now a member. Now that the companies within VIA are a single entity, their membership dues are decreased and their benefits no doubt increase as they have more purchasing power within the group than they did previously as individuals.
This purchasing power can extend to other costs of business: group health insurance, fleet vehicle purchases, phone services…all manner of goods or services.
Many larger retailers carry product model numbers not available at other stores or on-line. Occasionally these models have different features (one less HDMI port) than their mainstream counterparts but sometimes they are the exact same. Private models are more difficult for consumers to price shop and, in VIA’s case, would bring a sense of exclusivity that appeals to a certain clientele.
Shared expenses and resources would eliminate some of the redundancy and that six companies incur. Unfortunately, sometimes people are the redundancy but thanks to geographic diversity when things slow down in one market, people and resources can be allocated to a market that is experiencing a surge.
There are tremendous up-sides to a merger like this, and they are difficult to see at first. Many in the industry are focusing on the negatives right now. These are much easier to spot: company culture clashes, egos, valuations and accounting, human resource requirements. While Metcalfe’s law associates the value of a (telecommunications) network with the square of the number of connected users, some have created a corollary: that the complexity of anything increases with the square of the number of people involved. In the case of VIA, both will probably be proven.
Based on the articles/press releases I have read so far it looks like the partners have done a tremendous amount of work to mitigate the negative implications from a business standpoint; the personalities will have to sort themselves out.
Here are some links with the details as they are known:
and of course VIA’s Website.
This will indeed be interesting to follow over the next few years as VIA International expands to the East Coast and then goes international.