Grass Valley to Broadcast Market: “Enough with the M&A Speculation Already”

Joe Zaller | March 23, 2018

As we wrote the other day, the news that Grass Valley acquired Snell Advanced Media (SAM) raised numerous questions about the strategic rationale for the deal.

It also caused many industry participants to wonder whether Belden (Grass Valley’s parent company) intends to acquire additional media technology vendors.

This line of enquiry is entirely reasonable for a number of reasons.

Firstly, it’s no secret that Belden is a highly acquisitive company, and it often talks about its M&A pipeline. For example, during the company’s December 2017 investor day, Belden CFO Henk Derksen said “we now have $475 million of dry powder available to deploy and [we] are actively pursuing a number of attractive acquisition targets.”

Second, Belden’s current ability to make acquisitions is probably better than ever, thanks to the way it has strengthened its balance sheet recently through debt refinancing. For example, on its Q4 and full year 2017 earnings call, Belden executives said the company had lowered its pre-tax cost of debt to 3.9% compared to 5.3% at the end of 2016 – and that none of its debt will mature until 2023.

Plus, the 2018 NAB Show is two weeks away, and the rumor mill typically kicks into high gear around major exhibitions.

Against this backdrop, rumors have been swirling about Belden making another acquisition in the broadcast industry, potentially before the 2018 NAB Show.

Today, Grass Valley put those rumors to rest.

Halfway down an otherwise normal pre-NAB press release, Grass Valley president Tim Shoulders is quoted as saying:

“We acquired SAM to create a proven portfolio that helps our customers strengthen their operations. We have no plans to announce any additional acquisitions at NAB or in the near future. Our focus right now is to complete our product and solution integration strategy and deliver a superior level of service to our customers. While there has been some speculation about further consolidation in the market, it is not currently a focus for Grass Valley.”

So there you have it.  Grass Valley is not going to buy (insert name of favorite rumored M&A target here) anytime soon.

For those who are curious to know more about the company’s strategic plans, Belden CEO John Stroup will be speaking at the Devoncroft Executive Summit on Sunday April 8, 2018.

Shoulder’s statement is consistent with what the Belden told the market during its 2017 investor day when it announced a change to its capital allocation framework, resulting in an increasing focus on organic investment and a decreased focus on M&A.

At that meeting, Belden CEO John Stroup told investors: “Our top priority for capital allocation has always been organic investments. Over the last three years, approximately 15% of our capital deployed has been towards capital expenditures. Going forward, we’re expecting to increase that to 20%.

“Over the last three years, approximately 75% of capital deployment has been allocated towards M&A. Going forward, we expect to allocate approximately 55% towards M&A.”


At the same meeting, Stroup described the rationale for increasing the focus on organic investment, saying: “if you look back over the last three years, we’ve been disappointed with the organic growth over the last year. At the same time, however, we’ve been very pleased with share capture. So we’ve done far better in share capture in some cases than we expected, but we fell short of organic growth, which meant that our end markets didn’t behave the way that we had expected, and, in particular, oil and gas, as well as some of the things that happened in Broadcast.

“I think that we have a lot more conviction around what’s happening in the broadcast industry than we did two years ago. And as you recall – or you may recall, our concentration within production, in particular around live [production], gives us a lot more confidence that we’re going to see growth in that end market than we did, say, in the last two to three years. Our Industrial businesses have seen nice market growth and, in particular, discrete, has seen nice market growth for a while, we expect that to continue. We expect the headwinds from oil and gas, of course, to turn to moderate tailwinds.

“The organic investments we shared with you, we have obviously a lot of – we have substantial line of sight to those particular investments, and we have a lot of confidence that they’re going to pay dividends. And I think that Henk [Derksen, Belden’s CFO] and I feel as though, with the benefit of hindsight and with perfect clarity, there might have been some organic investments we could have made in the last three years had we chosen to allocate a higher percentage of our capital towards organic that we may have been able to overcome some of those unexpected headwinds had we made those investments.

“And that’s the way we approach this plan. We approach this plan with a view that, let’s be honest with ourselves about what we consider to be the macroeconomic environment, the secular tailwinds and headwinds, our share capture assumptions, but then what are things we can do additionally through additional [organic] investments… that would give us additional tailwind.”

“And so, I view it as a very conscious and aggressive maneuver towards our commitment of higher organic growth. Because, as I said, we’ve not at all been satisfied with how we perform the last three years in that particular category.”

It’s worth bearing in mind that Belden’s investor day happened two months prior to the announcement of the SAM acquisition, so it’s clear that Belden will pursue M&A where it feels appropriate returns can be achieved.

However, it’s also worth noting that the company operates in multiple vertical markets.

And based on today’s statement from Grass Valley president Tim Shoulders, it appears that whatever M&A opportunities Belden chooses to pursue are unlikely to be in the broadcast sector for the foreseeable future.

Instead the company will likely focus on integrating SAM into Grass Valley, and increasing its global service and support footprint.



Related Content:

2018 Devoncroft Executive Summit: The Business of Media Technology

Belden CEO John Stroup on Media Tech Supplier M&A, the Importance of Scale, Customer Consolidation, and Transition to IP

Grass Valley Paid $94.2M for Snell Advanced Media

Belden/Grass Valley Acquires Snell Advanced Media


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