Esco: Going for growth

Esco has been acquired by Japan’s Nikkei listed Techno Horizon Group. Hurrairah bin Sohail sat down with Christopher Lim and Sujith Sivaram to discuss what this means for the integrator as it looks to scale and grow.

The AV industry has been going through a prolonged period of consolidation. The trend continues as Esco, an established integrator with operations across Asia Pacific, has been acquired by Techno Horizon as a wholly owned subsidiary of its Group Company, Elmo.

First announced in July 2020, the move has been approved and ratified by all relevant regulatory bodies and sees all of Esco’s operations, except its presence in Indonesia, acquired by Techno Horizon Group.

Sujith Sivaram, managing director of Esco, comments: “Sometimes the term ‘acquisition’ puts forward a negative connotation and that is why we are announcing this news as Esco joining the Techno Horizon Group as a wholly owned subsidiary. It is more of a strategic business alliance rather than Elmo acquiring Esco to just further Elmo’s goals. Esco will continue to exist as a brand in its own right.”

Christopher Lim, general manager of Esco, adds: “In technical terms, this is an acquisition and you cannot deny that. But we look at Techno Horizon Group as investors and partners. They extensively studied the way we do business and obviously our profitability and long-term goals to see if there was congruence with what they wanted to achieve. After their due diligence was done, I think we ticked a lot of boxes where maybe other companies from the AV industry did not.”

As with any acquisition, Esco joining Techno Horizon Group has brought changes to the integrator’s board of directors. Lim explains: “There are not a lot of changes with the leadership. Eric Lim, our chairman, will be stepping down from the board and taking an advisor position within the group which is a natural and organic evolution of his role. The board comprises me and Sujith as well as personnel from Elmo and Techno Horizon Group. What this new board means is that whatever strategic decisions we have to make, we can do so with consultation and with a wider range of opinions which is very important. It will be leadership by consensus rather than a parent company telling a subsidiary what to do. The onus is still on us because we understand the industry and it is our duty to put forward initiatives but now we can get advice and expertise from different angles.”

One aspect that remains constant is Esco’s membership and role in the GPA. Lim details: “They saw our membership as one of our strengths and of course the GPA is excited that we are part of the Techno Horizon Group and the opportunities this opens up for us. One of our primary aims with the move was to remain in the GPA and we see this as a way to ensure that we can remain as a contributing member of the GPA for many years to come. The GPA is like our family and we have spent many years developing our relationship and playing a key role in Asia Pacific. I sit on the board of the GPA and Sujith is on the system operations council. We have invested so much time and effort over the last few years that for us it was essential that any new partnership we embarked on would not impact our relationship with the GPA.”

On Esco’s part, the move to join Techno Horizon Group was one that was geared to make the integrator move forward. Lim says: “The way business works today, if you don’t grow you are actually going backwards. Inflation and the cost of doing business is rising every year. If you take a passive approach to managing business, what that means is that the people that work in the organisation don’t see a future because if you don’t grow then they don’t grow whether that is in terms of personal fulfilment or in monetary terms. It is important to show that you have the intention and the ambition to move beyond what you are doing today.”

Lim explains how the move made sense for Esco: “We have a really good growth model and this can be seen in our numbers over the last five years, our year on year growth has been pretty significant [40% growth year on year for the last three years]. In order to continue this in an organic manner, which would mean utilising our own funds, there are limitations to that and maintaining this growth would have been difficult on our own. In terms of working regionally and through our involvement with the GPA, this has given us a broad understanding of how to scale business and that is what we thought would be possible with this move and bringing Techno Horizon Group on board.”

Sivaram details how further growth for Esco is already being pushed for: “A number of our offices in APAC are very new and have a lot of potential. For example, we have managed to establish a presence in Thailand, Hong Kong, India and Sri Lanka but the teams are small and we have been unable to grow them as much as we would like to leverage the opportunities in the markets. We will definitely be looking to strengthen the teams in these markets and make sure we can reap the full potential. And there are some markets that we have been eyeing for quite some time, countries like Taiwan, Nepal and Bangladesh. We will be expanding our presence into these countries as well.”

It is interesting to note that Techno Horizon Group is a manufacturer in its own right providing various products and services in the fields of optics and electronics, centering on optoelectronics technology.

Could this impact Esco’s function as an integrator? Sivaram says: “There are no directly competing products that we are dealing with. Elmo Group is strong in edutech and that is something we would like to focus on moving forward. We have some clients in the space, especially with the boom in Zoom sales for educational institutes and this gives us a reason to go back to them and offer this additional suite of classroom management solutions, learning management solutions and so on. These are direct and readily available solutions for us to take and run with.”

According to Sivaram, Techno Horizon Group’s stable of products dovetails even further with the direction of Esco. Sivaram adds: “We started our hostile mitigation division and Techno Horizon Group products complement our offering for HM. We want to expand our HM division to become an integrated security solution provider and not just perimeter security and this is something we are working on.”

Sivaram also sees the partnership with Techno Horizon Group as an accelerator for the integrator to explore emerging technology trends. He says: “Another aspect of this move is that it gives us access to an additional suite of products and solutions that Techno Horizon Group has. It expands our portfolio and what we offer to our customers. Plus, their capabilities in terms of research and development interest us. If we are to move into emerging trends such as AI or VR, then I think being part of the Techno Horizon Group will make that easier for us. They are very receptive to innovation and adding forward thinking suites of solutions and we are discussing the prospects of moving in the AI sphere and other emerging technologies.”

A lot of the avenues open to Esco after joining Techno Horizon Group seem to be a function of the latter’s role in the market as a product, solution and service provider. A common thread of acquisitions in the AV industry is that the acquiring company is usually a private equity firm. This was a trend that Esco wanted to buck as Lim says: “We tried our best to avoid going down the private equity route. Private equity firms, broadly speaking paint everything with the same brush. They are numbers people looking at every scenario through the lens of figures and sheets. And when they buy or acquire a company they are essentially gaining access to a different client base and they try to amalgamate everything and become a one-stop provider globally. In theory that seems like the right thing to do, but in practice we have seen how some these acquisitions actually progress.

“It is no exaggeration to state that it takes years to bring all the pieces together and integrate them properly because all the parts have their own way of doing things and they have their own culture. To us, the question is when private equity firms invest in a product or in organisations, do they understand all the factors at play? What are their expectations and what is their patience level? Because in AV, it is very difficult to predict how things will pan out and the situation can change very quickly if you are just looking at it in the form of numbers and figures. We wanted a different kind of investor and we are lucky that we got one.”

Sivaram concludes: “In private equity investment, the vision and mission of the organisation is purely numbers which are a time bound thing, you have to chase a certain revenue at a certain time. That is not what we have gone for, we have gone for a much more long-term and sustainable alliance. Both of us believe deeply in the vision of each organisation and we want to pursue that and support each other.”

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