The two distribution companies announced on Tuesday that, with the help of Dallas-based Brazos Private Equity Partners LLC, they were combining operations. Acquired by the private equity firm in a transaction initiated by Imperial Capital LLC, the new organization will operate as Tri-Northern Security Distribution Inc., with Tri-Ed and Northern executives Steve Roth and Mark Haney retaining the mantles of chief executive officer and president, respectively. Imperial Capital served as exclusive financial advisor to Tri-Ed Distribution and as a financial advisor to Northern Video Systems. The new company operates 41 locations across North America.
In an exclusive interview with SDM, Roth and Haney explained that the two distribution companies have been actively talking for several months about merging their operations. The reason? In a highly fragmented industry, consolidation is an appropriate strategy when there are a select few major players and a number of smaller entities.
“What you really need to find are the appropriate companies that, by putting them together, you leverage each others operations and you get combinations that make more than one and one equals two,” Roth said. “In this case, we’re really hoping it’s one and one equals three plus.
“Our teams fully recognize that the strength in this business, in our industry, is to have more scalability and find the right combinations,” Roth added
With the way these two companies complement each other in terms of expertise and operating models, the combination makes a lot of sense. With Tri-Ed’s strength in intrusion prevention and access control, and Northern’s focus on video, especially Internet Protocol (IP), the combined company’s product offering really becomes comprehensive.
Their business models are similarly complementary. Tri-Ed brings a wide-ranging network of branch offices that provide walk-in sales and support to customers; Northern Video has a more centralized model, Haney explains, with three facilities that handle sales primarily over the phone, shipping orders out to customers. Bringing the two together will offer customers an altogether different experience.
“Our existing customer base, once integrated, is going to get a different level of customer service,” Haney said. “We will become more of a one-stop shop.”
The effect of the merger on the two distributors’ product offerings is undeniable, as is the boost it will provide to their manufacturing partners. Haney expects the manufacturers to be very excited as this development expands their sales forces in a number of ways.
“I think our existing manufacturers are going to view this as a positive,” Haney said. “Northern has extremely strong relationships with specific vendors, and we plan to share those relationships with sales folks over at Tri-Ed. The partner manufacturers that each of us possess are going to feel a very positive situation moving forward.”
As for the product offerings themselves, the company continues to look for new opportunities. The product lines could expand in any area, as long as those products make sense for the company and its customers, Roth said.
“They don’t have to be security-focused; they don’t have to be video-focused. But anything that makes sense and is something that our existing dealer integrators would need or use would be something that we would be very, very open to adding to our line,” Roth explained.
Further expansion and consolidation in a number of areas is by no means out of the question either, Roth said. In fact, the company fully expects to add new branch offices and new employees, as well as new partners and products to its mix. The company will also integrate its educational and training programs, as it sees “continuing that process and partnering with manufacturers to grow that,” Haney said. However, it will take a bit of time before the new organization begins to aggressively pursue those objectives.
“We really need to level-set and integrate the businesses before we jump into expansion and hiring plans,” Roth explained. “Right now what we are doing is focusing on getting our teams fully acquainted with each other; making sure everybody realizes that this is a complementary situation, not a competitive situation.
“But the answer will be yes: We anticipate significant growth, and with significant growth comes additional job creation. And we anticipate additional acquisitions,” Roth added.