Acquiring Control - ResidentialSystems.com

Acquiring Control

AMX president Bob Carroll explains his company's recent acquisition by Duchossois Industries.
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The acquisition of AMX by holding company, Duchossois Industries Inc., was officially completed on April 8. According to representatives of the two companies, the $315 million transaction was designed to maximize AMX shareholder value, be transparent to its clients and end-users, and yet cause no disruption to the personnel at AMX. AMX CEO Bob Carroll says that going from a public company back to private also gives AMX Corp. much more operational latitude while maintaining the status quo for the company's customers. Carroll, who came onboard as CEO in November 2001, recently spoke with Systems Contractor News managing editor, Joy Zaccaria, to further explain the recent acquisition.

RS: What the status of AMX prior to the Duchossois acquisition?

Bob Carroll: When I came on to the board of the company in November of 2001, the company was in some serious financial straits because of its lack of focus on its core business. We spent a significant amount of effort for the first year and a half refocusing and reengineering the company. You see the results with more than 100 products that we brought to market over the last couple of years. In the process of turning the business around, I'd say 18 months ago, we started to get interest from other companies wanting to invest in AMX. We had, as a public company, entertained anybody that called that wanted to take a position in the stock.

How did Duchossois approach you?

We had some 25 different companies strategically interested in AMX--some folks from the industry, some from outside the industry. The good news is that the Duchossois group out of Chicago completed the transaction, and they came from outside the industry.

What's interesting is they actually had come and visited about 18 months prior and looked at the company as an investment. At that time, the price of the stock was I think around three or four dollars a share. I wasn't interested in diluting the business and initiating more shares at that time, so we made the decision to keep moving forward. We self-funded our growth, brought new products to market, and the company continued to perform.

Before we went private, we had 14 successive quarters of profitability in the public sector. The Duchossois group had come back to the table a year or so later and said, "We think the markets are really starting to develop--both in the residential and in the commercial space. We think AMX is positioned very strongly and we can help you leverage your resources and enhance the lead in the market by making the investment in AMX and taking the company private." By leveraging the significant resources that are available within Duchossois, the company would be able to maintain a strong position for the long term.

What does it mean for the shareholders?

We put a tremendous amount of time and effort into making sure we did create shareholder value and maximize shareholder value in a public company. We sold the company for $315 million. The company's value almost two years prior was almost $12 million. We were very pleased with what we were able to do for shareholders.

What impact should this deal have on your customers?

In terms of day to day, it will have none. We will maintain the same management team and the same leadership in Dallas. We maintain the name. What it will do over the long term is allow us to bring additional products to market quicker and allow us to expand in vertical markets at a rapid pace.

We believe that day to day it will be transparent to our customers, our dealers and obviously the end-user customers. Nothing has changed other than we are going to continue an aggressive investment to get more products to market and to provide more resources and feet on the street to help the channel move more product.

Does Duchossois have a focus that they would be imparting to AMX, in terms of products?

Obviously we have access to capital we didn't have before. That allows us to invest more internally in R&D and also to go outside. We have an acquisitions strategy whereby if we find businesses that can leverage our market position, we have the ability now to do that as a private company. As a public company you do as well, but it's very costly in terms of equity. With a substantial backer like Duchossois, we can look at strategies that we were a little reluctant as a small public company to go after.

How is the management team affected by the move back to being a private company?

It affects us greatly, because we don't have to worry every day, every month, every quarter, about the stock movement. A couple of quarters ago, we announced the best quarter in our company's history, and the stock went down. In a public company it's very frustrating. When you're running a small public company, you have one hand tied behind your back constantly, because your focus is short term. With a small public company you're hesitant because it can impact your shareholder value. As a private company, with the Duchossois Group, we can aggressively make investments and not be hindered by having that one hand tied behind our back.

What about the rest of your employees?

For our employees, it provides long-term career paths and stability. In many cases, when there is an acquisition, there are [layoffs .] That's not the case with the Duchossois. They're a family business. In 1916, AG Thrall started what then was called Union Wagon Company. After WWII, Dick Duchossois took the business over from AG and the business was in need of new leadership and management. Dick Duchossois is still active today. He's 83 years old. What he created was the foundation for what the Duchossois industry is today. It was one of the world's largest manufacturers and refurbishers of rail freight cars. That business merged with a New York Stock Exchange company called Trinity Industries. That happened in 2001. Now the Duchossois are the largest shareholders of Trinity Industries which is a public company and now is the world's largest manufacturer of rail cars and containers that you see on the back of ships.

Coincidentally, another piece of their business is called Chamberlain Manufacturing, which started in 1906. In the '80s they created the Chamberlain Group, which is today the world largest manufacturer of residential and commercial door operators and access control products. Their headquarters for all of these businesses are in Elmhurst, Illinois, outside of Chicago since 1967. There's an awful lot of history and tradition.

We have a very long road in front of us because of the markets we're in. It's a dynamic opportunity for our company and our industry. They are not in the business to get out in three to five years. They are not in the business to go flip it to somebody else. They are in it to grow it for the long haul.

Will there be any personnel changes at AMX?

There will not and that's the other thing that's unique. Let's say a very large international conglomerate acquired the company. They probably would have asked me to leave; they probably would have had their own president they'd want to put in. The Duchossois guys asked the entire management team to stay right up front. We're going to hire more people. We're going to go after the markets more aggressively.

Joy Zaccaria is managing editor of Systems Contractor News, sister publication to Residential Systems.

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