Technology Consolidation Continues

The merger of router, infrastructure and automation supplier Pro-Bel with video processing specialist Snell & Wilcox earlier this month continued the consolidation trend that broadcast equipment vendors have been riding for much of the past decade. While a new venture capital-backed Web video software startup seems to surface almost daily, the number of discrete manufacturers of specialized professional video hardware and software for television stations and networks keeps shrinking.

The Snell/Pro-Bel deal, orchestrated by British private equity firms Advent Venture Partners and LDC, is worth 72 million British pounds, or roughly $99 million. The deal follows Miranda Technologies' $40 million acquisition of routing specialist NVision in December, and French conglomerate Thomson's announcement in January that it will sell its Grass Valley broadcast equipment business.

Snell and Pro-Bel executives say they are joining forces to gain manufacturing scale as well as engineering and sales-force heft, and to better address broadcasters' moves to multiplatform distribution. They also note that there is little overlap in the two companies' product lines besides modular infrastructure products, which eventually will be transitioned to a single platform.

Snell & Wilcox CEO Simon Derry, who will become CEO of the combined firm while Pro-Bel CEO Graham Pitman will serve as deputy chairman, says that customers today are looking for more integrated solutions and for suppliers with global scale. He adds that the two companies' management teams were a good fit.

“There was a very strong alignment, a high customer-service orientation and a great cultural match overall,” Derry says.

The new company will unveil its new name at the NAB show next month. It will have 450 employees, 2,000 active customers in more than 100 countries and annual sales of around $110 million.

In hindsight, the deal is not surprising for two companies looking to unlock value. Pro-Bel, which was separated from then-parent Chyron through an LDC-backed management buyout in 2003, announced plans to go public in 2006 but subsequently aborted them. Meanwhile, last year Snell & Wilcox spun out its promising iCR software-based transcoding and content-repurposing product into a separate company called AmberFin, which is pursuing new customers outside the broadcast realm.

Snell & Wilcox and Pro-Bel customers interviewed last week were supportive of the merger, though they were waiting for more details on how their sales and support might change. Del Parks, VP of engineering and operations for Sinclair Broadcast Group, which has standardized on Snell's Kahuna production switcher for HD upgrades at its stations, said that Snell's merger with Pro-Bel is “probably a good move for them,” though he noted the automation business was a tough one in the U.S.

Parks expects more technology mergers to come in the next year. “I think consolidation is probably in the cards for a lot of people,” he says.

Raycom Media is standardizing on Kahuna switchers for its news-producing stations, and also has Snell infrastructure gear and Pro-Bel routers and automation products in several stations. Raycom CTO Dave Folsom says that “consolidation can be good to a point until you're down to one vendor,” a situation Folsom doesn't want to see in any product category. He adds that the relatively finite size of the U.S. television station market—some 1,800 stations—makes it hard for small-to-midsize specialists to survive.

“In general, there are a good number of vendors in any of these particular specialties; there are probably too many vendors,” Folsom says. “When you look at the ability to support [their products] long-term, many companies don't have the magic base of users out there to justify customer support. If you only sold eight systems in the U.S., how long are you going to support them?”

Miranda has become one of the big players in master-control and infrastructure gear alongside Harris and Evertz, and has also gained share in the graphics space since acquiring VertigoXmedia in 2006. It originally tried to acquire NVision in 2002, but the financing for that deal fell through.

“Despite the fact we're much larger [now], the rationale is very much the same,” says Miranda CEO Strath Goodship. “Not only do the product lines fit very well together, but the cultures are very similar.”

Moreover, NVision gives Miranda, which previously made small routers, a line of large-scale routers that are capable of 3 gigabit-per-second operation. These are necessary to pass uncompressed 1080-line-progressive HD signals around a plant or handle two simultaneous 1.5 Gbps feeds for 3D production. Pro-Bel also makes large 3-gig routers. Goodship says the technology is increasingly in demand, particularly for new facilities being built overseas.

“It starts with future-proofing things,” he says. “It's really at the core of your plant, and you can't change your mind. You can change the glue [modular infrastructure gear]. But the core switching, you've got to get right at the start.”

David Tanklefsky contributed to this report

E-mail comments