Acquisition Leaves Worcester's Telecast Fiber Systems Untouched | Why a shoot-from-the-hip fiber optics firm cozied up to its new corporate parent
Entrepreneurial companies tend to enjoy their status as the economy’s independent thinkers. They’re nimble, driven and creative.
But they can also be disorganized, unmotivated or burnt out.
Telecast Fiber Systems in Worcester is one of the nimble, creative ones. But that doesn’t mean its founders didn’t admire the structure and efficiency of larger corporations in the electronics industry. And when it came time for Telecast to “consider our capital alternatives,” as company president and co-founder Richard Cerny put it, the lure of the lean operations and management structure of cable manufacturing giant Belden was too much to resist.
Telecast was acquired by Indiana-based Belden last month and the results are about as good as any newly-acquired company could hope for.
Cerny said he was surprised by how little Telecast would change as a result of its acquisition.
Telecast will keep its name with the addition of “a Belden brand” to its logo. It’ll remain at 102 Grove St. in Worcester and keep all of its 50 employees.
“The culture at Belden is just made up of really nice people, plus they have things we need, like lean manufacturing, a more efficient operation and better management (practices),” said Cerny. “We’re an entrepreneurial company that’s been around for 18 years just shooting from the hip, and they’re up on all the latest management practices.”
The Cable
The two companies occupy different areas of the same sector. Belden makes cable — lots of it, (there are probably Belden-made cables attached to your computer right now) — including fiber optic cable. Telecast makes equipment that fiber optic cables in the broadcast industry plug into.
“We coexisted for a long time, and we met by virtue of that. We had so many people pointing us in each other’s direction,” Cerny said.
Fiber optic cable replaces tons of electronic cable with just a couple thin fiber optic lines about the same diameter as a pencil.
Telecast’s equipment converts the electronic signal coming from television cameras to a very high-speed optical signal that can be transmitted over fiber optic lines. At the other end, Telecast equipment converts the optical signal back to an electronic signal for broadcast.
For broadcasters, the advantage of using fiber optic cable is clear. For example, CBS, when it broadcasts the Masters Golf Tournament, sends one truck rather than two to set up all the audio and video equipment.
That truck can have the network set up for broadcast within a couple of days and quickly be back on the road to the next assignment.
It makes imminent sense for Belden to offer such a complement to its cables.
But the advantage isn’t all Belden’s.
“It’s all about growth,” Cerny said. “This brings a whole new market to our products,” specifically the medical and security industries. And Telecast will have access to Belden’s sales force to make those connections happen.
Like almost any business in the last couple of years, Belden, which is publicly traded, has been hit by the worldwide recession.
In the face of weakening demand in 2008, the company aggressively cut costs. In the first six months of 2009, Belden took severance costs and asset impairment losses of $52.2 million, according to U.S. Securities and Exchange Commission filings.
Through the first nine months of 2008, Belden made a profit of $86.2 million. In the first nine months of 2009, the company lost $44.8 million.
However, the company entered the fourth quarter of 2009 with $312 million in cash and equivalents compared to $227 million at the end of 2008.
Speed The Deal
The Telecast acquisition happened fast. Cerny said the entire process from initial contact to the closing of the deal took place in the second half of 2009.
“We’re not changing anything right now,” Cerny said. “It’s not the wholesale changes you think would happen when a big company buys you, but we’re a successful company that makes money.”
The fact that Telecast will still be Telecast indicates that Belden is a smart acquirer, said Jeffrey Donaldson, the Mirick O’Connell attorney that represented Telecast in the merger.
“Smarter companies that are doing acquisitions leave management in place, leave business practices in place,” Donaldson said. “There are a lot of creative juices there, a lot of thoughts and a lot of product development.”
Donaldson said he’s been involved with acquisitions that go very poorly as a result of the acquirer’s failure to recognize the value in what they’re buying.
For efficiency’s sake, it makes sense for a large acquirer to want one single set of business practices used throughout its different business units. But getting there, through the acquisition team and the business practices team and so on, can be a killer. “For some, it’s very important what the match is, and I’ve seen target companies turn down more money because it wasn’t a good match,” Donaldson said.
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