Framework for action
Ross Evans, a chartered accountant in Calgary’s oil and gas industry, began building a frame structure capable of supporting computers in the 1980s, after visiting clients and seeing tables bowed under the weight of heavy CRT screens. Evans Consoles has since evolved into a leader in the design and manufacture of custom solutions for technology-intensive and infrastructure environments such as 911 centres, surveillance and homeland security control centres and air traffic control. More than three years ago, Greg Smith, who became CEO in 2004, and Bill Burkett, now chairman, bought out the private equity firm that held Evans Consoles. That change in ownership has allowed the company to drive international sales and double-digit growth. While the U.S. market still accounts for 45% of sales, with the FAA, NASA and the Pentagon as clients, the company has strategies to enter specific markets that include greenfield and merger and acquisition growth. Sales outside North America now make up 45% of total revenue, compared with 5% eight years ago. Total revenue increased 300% in the period. Last year, annual sales rose 14% and are on track to hit $65-million this year. In a conversation with Mary Teresa Bitti, Mr. Smith and Richard Game, executive vice-president, business development, share the company’s global growth strategy.
Q What led to the change in ownership and how did that facilitate your turning point?
Greg Smith “Richard and I both joined the company in 2004. At that time a New York private equity firm owned the company. About 3½ years ago, my business partner Bill Burkett got a call from the investors, who were interested in selling. We bought out the equity firm and the secured debtor, which was an insurance company and now each own 50%. That was a huge turning point. It meant decisions could be made much more quickly and we could be much more responsive to market opportunities. We went from taking quarter-by-quarter steps to being able to respond immediately.
Q Is that why you turned your attention to global markets?
GS “Richard, Bill and I have all focused on the international side, and for our company, that means looking beyond the U.S. Since we made growing globally a strategic objective, the great growth of the company has come from moving into international markets. We had been looking at international markets even earlier, but it took much longer to make things happen when we had to report to the board.
Q What was one of your first significant acquisitions outside North America?
GS The acquisition of the assets and intellectual property of two companies in the airport check-in counter space in the Netherlands. That came about because Richard and I had been looking for opportunities in the air traffic control tower space — a new vertical for us that came about because of a pilot project we had taken on for the FAA. We had identified these companies and on an around-the-world trip, stopped, met these guys at the airport and two months later the deal was done. We formed a Dutch company, Evans Airport Solutions (EAS), and folded the assets of the businesses into EAS. Through EAS we have completed projects in former CIS countries. Last summer, we completed a large project for the airport in Danask, Ukraine, in time for the Euro Soccer Cup 2012. We did the check-in counters, passport control. And we won a fair amount of airport opportunities since in those countries.
Q How has your approach to strategy changed since the change in ownership?
Richard Game We can invest for the longer term. In the past, it was almost like being in a public company where you were focused on quarterly results and now we can think strategically long term.
GS When we were reporting to the board, we had strategy meetings once or twice a year, where we would be identifying new areas for growth. But the shareholders were gun-shy. They did not want to make any further investments; they were very cautious. Since we bought them out, we are able to aggressively pursue international opportunities. We opened a sales office in Dubai and a second factory in China. We formulated a strategy committee made up of the engineering vicepresident, the solutions vice- president, someone from our finance group, as well as Richard, Bill and myself. We meet quarterly to identify those opportunities and we are able to move quickly.
Q What does your growth strategy look like? Is it largely focused on organic growth? Or M&A?
GS We do both. When we are thinking about acquiring a company, we want to pay as we go. That means acquisitions are probably smaller than they could be but we are more comfortable. We always want to be able to say it’s the right investment in a company that is taking us in the right direction. And because we are in it for the long haul, we don’t panic if we miss a forecast a few quarters out. I had much more external pressure when I was reporting to an outside board.
RG We call our acquisition strategy a fill-in strategy to acquire market technology or position we don’t have. The Dutch companies, for example, were in airport counters and interiors. We were not a player there. It would have taken a long time to grow that organically. On the organic side, we have the main mission, critical control room business and we are growing that by moving into new niche markets with the same product, entering into new countries.
Q What does entering a new geographic market look like for Evans Consoles?
GS When we entered China, for example, we started by working with dealers and an agent before recruiting additional salespeople. Richard and I spent a lot of time there developing a dealer plan, a go-to market strategy, a website hosted there. We built all the infrastructure to support a local country market and as sales grew, we opened showrooms in Shanghai and Beijing and then came the factory. We’ve taken the same approach in the Middle East and India. In fact, in India, after spending three years developing partner relationships and infrastructure, we now have some large government projects and it’s time to hire a country manager.