A little more than a year after Genstar Capital launched its Installs Inc. installation services platform, the firm has added to the business, acquiring RadioShack’s struggling AmeriLink subsidiary in a deal that roughly doubles Installs’ size. The deal was finalized in October.
San Francisco-based Genstar started the Installs platform with the $21 million acquisition of Digivision Satellite Services last September and used its $221 million Genstar Capital Partners III fund for the purchase. When Genstar bought Digivision, it did so with a layout to grow the company through acquisitions. And Digivision had had its eyes on AmeriLink even before it assumed its place in Genstar’s portfolio.
“This is a deal Digivision had been looking at for two to three years,” Genstar Vice President Darren Gold said. “It had maintained a regular periodic dialog with the senior management there, and when RadioShack decided to divest the business, had a head start [in the negotiations].”
Gold would not comment on what Genstar paid for the business, other than to say it was less than the $75 million RadioShack paid when it acquired AmeriLink in 1999. To finance the deal, Installs will use cash and debt already on its balance sheet.
While the AmeriLink franchise has largely underperformed as part of RadioShack, Gold feels the company will flourish with the synergies available through merging with Installs, in addition to freeing itself from the confines of being a captive of a larger corporation. Genstar expects the company to start showing profits within the first three months of ownership. “Amerilink has a heavy fixed-cost model, and RadioShack really struggled to make it a profitable business. Our goal is to leverage the core systems that we have to take out a lot of the costs,” Gold said. “As a captive of a major retailer, AmeriLink couldn’t offer its services to other retailers.[AmeriLink’s] model is decentralized, with over 40 field offices focused on providing a localized level of service.”
Installs has gained a national customer base, a number of operational capabilities and a much broader infrastructure of field service, allowing it to provide DBS and cable in-home installation, in addition to the consumer electronic and repair services that it could already service.
The Installs platform-which is benefiting from the general convergence of entertainment products in the home, such as broadband, home theatres, stereos, and other merchandise-will continue to pursue add-on deals to supplement its expected organic growth.