The deal gets STRATACACHE CEO and sole owner Chris Riegel access to a global channel partner program and reseller network, which Philly-based Scala had built up in the last 15-20 years.
The deal is not all that big a surprise, as Scala has been known to be on the market, for the right price, for the last few years. The executive house-cleaning that saw CEO Tom Nix and several other execs leave in June was a bit of a signal that things weren’t going all that swimmingly for the company.
There has been endless talk of industry consolidation among the CMS companies, but there has been one significant problem with that concept: Very few companies have the sort of balance sheet that would allow them to be buying someone else.
There’s also the issue of buying software and intellectual property that would be of nominal value in a market where developing a CMS is not all that hard, and largely proprietary ones like Scala were increasingly being viewed as expensive and perhaps unnecessary.
My safe guess is Riegel got Scala for a song, because the European investors wanted out. And he very likely got it not for the software – STRATACACHE is solid – but for the global partner ties (some 500 active) and the great top of mind awareness Scala still enjoys.
It’s a real “Oh how the mighty have fallen” story for Scala. The first InfoComm I went to, maybe 10 years ago, Scala was utterly dominant there. The company was THE digital signage solution for the pro AV and systems integrator crowd.
Lately, the company has seemed to scratch along, trying to tie itself to whatever seemed hot – Android, SoC, Google Chrome …
The official press release says:
Combining the largest U.S. digital signage company with the largest international digital signage company will provide significant operational synergies and allow both firms to deliver enhanced solutions and services to customers across the globe. STRATACACHE’s strong balance sheet and large-scale operations will enhance Scala’s competitive edge – and Scala’s global channels and significant reseller and partner network will fuel STRATACACHE’s growing business outside of the United States.
“STRATACACHE has great admiration for the Scala platform, the Scala team, the Scala Reseller Channel and the great history of the company,” said Chris Riegel, CEO of STRATACACHE. “With the STRATACACHE acquisition of Scala, we believe that we can help Scala and its partner channel realize the runaway success that STRATACACHE has experienced in the digital signage industry, while significantly improving the depth and breadth of products and services for Scala customers and channel partners worldwide.”
The acquisition brings significant operational scale and cost advantages to Scala and will directly benefit the Scala dealer channel through STRATACACHE’s commitment to additional channel investment, resources and solutions that will broaden the scope of offerings for the reseller channel.
STRATACACHE, if you don’t know, is based in Dayton, Ohio, and says it serves 28 countries, with offices in San Francisco, Los Angeles, Chicago, Bentonville, Dallas, Toronto, Montreal, Vancouver, London, Hong Kong, Tokyo, Adelaide, Luxembourg and Bangalore. Riegel says his company is on track to do about $500 million in sales in 2016. That rolls in a number of related companies, and is not just signage software. I know lots of industry people who are skeptical of those numbers, but even if they are half that, the company’s sales are substantially higher than its CMS rivals.
Unless you want to call Google, or Alphabet, a signage software company, I am damn near certain there are no other companies approaching $100 million, and the vast majority would be $10-$20 million, and most way less.
No terms of the acquisition were released, but you can be assured it was not multiples of Scala’s annual sales, which were probably something in the range of $25 million last year.
About a year ago, Riegel picked up IZ-ON Media for $1.65 million from Technicolor. Terms were not disclosed, but you can find that number in Technicolor’s annual report. Ten years earlier, IZ-ON (then Premier Retail Networks) was acquired by Technicolor (then Thomson) in a cash deal worth $285 million.
The press release suggests Scala will continue as a brand (for the market it serves, it is waaaay better known that STRATACACHE), and Scala users will keep on using Scala, and Scala resellers will keep on reselling that. However, there will be people doing similar jobs in each company and people Riegel (not a guy who suffers fools gladly) will likely suggest weigh new options.
I’ll see if I can get some perspective from Riegel later today.
Dave Haynes is the founder and editor of Sixteen:Nine, an online publication that has followed the digital signage industry for some 14 years. Dave does strategic advisory consulting work for many end-users and vendors, and also writes for many of them. He’s based near Halifax, Nova Scotia, on Canada’s east coast.