Private equity firm Black Dragon led by a former Avid boss has acquired Grass Valley from Belden in a deal set to harness the company’s “responsible innovation” and foray into cloud and SaaS solutions.
Black Dragon Capital has swooped in to buy Grass Valley from Belden after it was put up for sale towards the end of last year. The private equity firm, led by former Avid chief executive Louis Hernandez, will become the fourth owner in the last 20 years, following Thomson Multimedia (now Technicolor), Franscisco Partners and Belden.
A transition in ownership enables Grass Valley to refocus its investment plans in workflows that are flexible, software and cloud native, and enhance customer opportunities at the forefront of industry change.
That is how Grass Valley president Tim Shoulders explains the company’s recent sale to IBC365: “It will help us streamline our decision making and make better decisions that are in the best interest for our customers because the entire organisation, including our ownership, is aligned around this broadcast market and what our customers want.”
With no “dramatic shift in focus of the company or reengineering,” Shoulder says “it will be a responsible change that will be positive” for Grass Valley and its customer base.
Black Dragon Capital is a private equity firm that has investment in key markets including sports media. Its ethos is to invest in growth companies across industries that are being disrupted by digitisation.
Whilst there were other private equity firms in the running with Shoulders confirming “multiple bidders” went through the process. Ultimately, Belden “made a decision based on their best financial interest and the best interest of Grass Valley.”
The deal, which was confirmed earlier this week, began with a relationship forged by former Avid boss Hernandez, who started a dialogue with management after the news broke last October that Belden would divest its live media business in a bid to save $40 million annually following a strategic review.
Calling the new partnership “a suitable fit with Grass Valley,” Shoulders explains: “Black Dragon has been with us from the beginning as we marketed the business and have been a great partner throughout this process.”
Acknowledging the market evolution and impact of IP changing customer expectations, Grass Valley is looking to shift the focus from a traditional business model and “big fifth capital purchases” to offer more software focussed product lines.
“Black Dragon has been with us from the beginning as we marketed the business and have been a great partner throughout this process.”
Shoulders adds: “Having Black Dragon ownership helps us - in that they have experience not just in the sports and media industry but also in banking and ecommerce with companies who have gone through this transition.
“We don’t have to learn as we go, we can learn from mistakes they have made in the past or experiments they have done in other markets and have a faster and less rocky transition to these new ways of doing business.”
On the acquisition, Black Dragon founder and chief executive Hernandez said in a statement: “We see tremendous opportunity for transformation in the media technology market and believe that Grass Valley is in an ideal situation to lead the market through these changes.
“Black Dragon’s experience leading companies through digital transitions will allow Grass Valley to accelerate the next step in its evolution, bringing more innovative products to market faster.”
“Black Dragon’s experience leading companies through digital transitions will allow Grass Valley to accelerate the next step in its evolution, bringing more innovative products to market faster.”
Strategising for success
Under Belden’s leadership, the Grass Valley portfolio expanded, and the business developed into a discipline that put it in the upper quartile of the market in terms of profitability.
Speaking to IBC365 last year, Shoulders addressed Belden chief executive John Stroup’s comments describing the business as being “lumpy” and difficult to predict, saying: “As a publicly traded company with quarterly obligations to provide steady growth, Belden really struggled with the volatility of the Grass Valley business.”
Grass Valley has seen three different owners in the last decade and when asked about the turnover of ownership, Shoulders admitted he hasn’t yet “reflected on that”. However, he believes It is “a result of the changing marketplace.”
“Previous owners came into this media business with expectations about how things were going to turn out and things turned out differently for a variety of reasons,” adds Shoulders.
Under a private firm, Shoulders is confident the Grass Valley business will succeed because “you are less beholden to those results in a fixed given time period.”He also points to “the opportunity to be more long-term focussed and make decisions that are better for the long term versus short-term.”
The ability to make decisions that maximise the company revenue and profitability are key focusses going forward.
Quantifying changes
With technology changing so vastly in the last 10 years, Shoulders explains: “Media and technology is a really interesting space to be in and [this is] an industry where the use of technology and R&D investment is high and it’s exciting to be part of because it touches lives every day.”
He is optimistic that the Black Dragon ownership is one that is mutually beneficial for both parties and for its customers.
He adds: “What is different here today is that the buyer comes from a media background and understands the market. That means we will be able to adapt to the market as it needs it because it is changing all the time.”
Shoulders joined Grass Valley as president in January 2018 after he was an employee of Belden Broadcast for nine years previously.
“Part of the reason I am staying to lead the business is Louis’s [and Black Dragon] confidence in our uniformed management and because we have a significant amount of alignment in our long-term process.”
“What is different here today is that the buyer comes from a media background and understands the market.”
In the short-term customers can expect no significant changes to the organisation with Shoulders reassuring the “priority and reliability on quality is how we plan to continue operating, it is business as usual.”
The opportunity to “refocus” is one that Shoulders and his team are not taking lightly with plans to invest in workflows that are adaptable, software-based and cloud native, to enable customer flexibility from workflows to payment models.
“Ultimately this is great for our customers and great for the market.
He continues: “It will give our customers more freedom to experiment with new revenue models on their end because they won’t have to commit to big capital purchases in order to experiment with new production or revenue models and for that, I think the [Black Dragon] ownership is very positive.”
Business as usual
Grass Valley’s core business functions, sales, manufacturing operations and R&D are already separate from Belden and Shoulders emphasises that there are no plans to restructure the management of the company.
Shoulders is prioritising the migration of some of its back-office systems from Belden with the aim to transition 80% of those systems within the first year.
Belden retains a financial interest in Grass Valley but not a controlling interest, so “they have that reason to help us to transition to a standalone company,” he adds.
- Read more: Belden confirms plans to divest Grass Valley
“In the near term I don’t expect it to really be any different for our customers working with Grass Valley and all conversations with customers so far have been very positive.
“I am confident about this transition and that this is a good outcome because it results in the least amount of business disruption.”
He says “any changes” would be part of the “normal course of operating the business” and pointed to a few leadership roles he is looking to recruit for including CFO, CIO and head of HR. As the business separates from Belden it will need to backfill the resources previously supported from its former owner.
“There is a commitment by Black Dragon to this management team and vice versa as we want to be successful together.”
Going through the process of selling the business to Black Dragon, Shoulders notes the “nice rapport” he has developed with Hernandez, “I expect that to continue post acquisition,” Shoulders explains.
Hernandez will now take on the role of executive chairman at Grass Valley, helping to develop the strategy gained from his “deep and meaningful relationship with customers,” as well as being responsible from a commercial perspective.
Shoulders made it clear that he will continue to run the business and be responsible for all operational decisions with no overlap from the new owner.
“[Hernandez] is there to help me as much I need help and I think he will be a very valuable asset as well as the entire Black Dragon team in helping us formulate our strategy to grow Grass Valley and continue to create value for our customers.”
Grass Valley on show
Looking ahead to NAB this year, Shoulders says the firm will be unveiling several new operations.
“We have a significant camera platform launch; we have innovations on our inner switchers portfolio and both those products lines being really centre to our identity at Grass Valley.
“We are going to have some major product launches, as we go further down the product lines, you are going to see some really creative stuff when it comes to other areas in the business including production, automation and our playout portfolio.”
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