We haven’t seen Bill Gerba, CEO of WireSpring, on the talk circuit for awhile, but we know that he’s an excellent speaker, and since we regularly read his well-researched eNewsletters, we know that his presentation at the Digital Signage Investor Conference will be well worth hearing.
Gerba will be speaking on Day One at 2:30 p.m., and we expect that he will be expanding on the series of articles he has written over the past three years detailing some of the higher-visibility mergers, acquisitions and ownership changes that have happened, with a focus on the apparently lack of strategic deals. (Most have been on the order of rollups, nonstrategic divestitures and vertical integrations.)
We asked Gerba whether he is seeing a trend in a particular type of merger – maybe in vertical, small networks, or software operations?
“Non-strategic acquisitions by integrators, PE/holding companies and rollups (mainly small network operators selling their assets to larger and better capitalized network operators)” Gerba says. “There have been very few clearly successful deals, and even fewer that gave the acquirer some strategic advantage that they lacked before.”
We asked why, from his viewpoint.
“For solution providers, there has been difficulty differentiating from the pack of 400+ others, and probably a lack of vision when pitching potential acquirers as to the strategic benefit of owning a digital signage solution outright.
“For network operators, likewise there’s little differentiation other than, of course, the venues that the screens are parked in. Frequently service contracts or venue lease agreements are in a poor state (or missing altogether), leaving the acquirer with a potential mess on their hands. Plus, since few operators have demonstrated an ability to consistently monetize screens, simple scale is often as much a liability as an asset, thus lowering the potential for strategic value.
“Mostly, though, there just isn’t as much money in the industry as everyone thinks there is, and consequently a lot of small companies wind up overspending, underselling, and are left on the brink with few options other than an asset sale or small equity sale to hopefully recoup some of the initial investment.”
“Oh, dear! What does this bode for the future?” we asked.
“I don’t see this trend changing anytime soon, unfortunately,” says Gerba. “The glut of underperformers seems to be harming both the buy-side and sell-side of the equation. Genuinely good companies have a hard time getting top dollar because of the history of mediocre (at best) industry performance. And buyers who could genuinely make a strategic case are hesitant to even enter the space due to all of the usual factors – market saturation, lack of differentiation, and so forth.”
It sounds like this could be a very sobering cold shower for some of the audience!