Business mergers offer the electricity and excitement, as well as inherent complexities. Glitches and stutters during restructuring should be expected, but can be taxing, even on a successful firm. Moreover, marrying two distinct identities and styles is tantamount to a culture clash.
The leadership of one recently formed company, however, contends that the advantages of partnering outweigh the disadvantages, and that two robust installation firms have now become even stronger as one.
In their monumental merger, two Washington-based companies–Digitech Home Systems LLC and Bel Tek Electric Inc.–partnered in March, creating one of the largest electrical and low-voltage contractors in Washington State.
The new entity is now operating as Digitech Home Systems (www.digitechhome.com), and is gaining significant market share in the Pacific Northwest U.S. Both companies shared parent ownership for three years while functioning as separate identities, two blocks away from each other in the Bellevue area.
For over a decade, Bel Tek enjoyed excellent relationships and a strong reputation in the electrical industry, focusing on residential and commercial electrical systems and service. Rick Flescher and Rod Moore owned Bel Tek Electric, and in 1999, they decided to form a new firm, called Digitech, which would be devoted to residential audio/video installation. Along with Flescher and Moore, there were two other partners who created Digitech: Jim Monson, a Bel Tek employee for 10 years, and Lee Travis, who joined the company from another low-voltage firm.
In late 1999, Monson and Travis began building Digitech, while Flescher and Moore ran Bel Tek. The four owners met monthly for board meetings to review major items, but the teams of two stayed with their respective companies. For Digitech, Travis controlled project management and operations; Monson ran the technical side. Monson had been an electrician for many years, and when Digitech was formed in 1999, he served as Digitech’s advisor, overseeing all electricians and technical staff.
The core of Digitech’s original business was high-end low-voltage systems-structured wiring, security, lighting control, shading systems, phone intercom systems, audio/video, home theater and home automation. It is the addition of line-voltage electrical service that now allows them to cater to any client need.
The leadership team of Travis, Monson, Flescher and Moore-now equal owners of unified Digitech Home Systems-exude confidence in their partnership. The merger has created “a ‘one-stop shopping experience’ for homeowners, builders and other industry professionals,” stated Travis in his initial announcement of the partnership.
“Now we have an organization that will provide all aspects of residential electrical and low-voltage systems.”
Travis, in particular, viewed the merger as not only logical, but essential. Since the inception of Digitech, it and Bel Tek were marketed to clients as partners, and packaged as line- and low-voltage services. And though they shared many commonalties–their businesses were in the same neighborhood and they shared 75 percent of their projects–they had different management.
It wasn’t quite seemless. “We had duplicate project managers and different billing, bidding and interfaces,” Travis said. “So the package we were delivering was good, but only 80 percent efficient.
“When you are in two different offices with two different styles of software, it is just not 100 percent seamless. We worked together as well as two companies with common ownership could.” To optimize their resources and expand capabilities, however, merging was the right choice.
Digitech currently operates out of its original facility on 124th Ave. NE, in Bellevue, and employs 79 people. It continues to grow its income exponentially, and in 2002, Digitech and Bel Tek combined invoiced more than $8 million.
While operating as a one-stop specialty shop connotes a “full-service” persona, Digitech doesn’t see the need to offer every product and service under the sun. For example, the company’s programming team installs only Crestron residential control systems. “We want to be extremely good in one system, rather kind of good in multiple systems,” Travis stated. “For any one of these manufacturers, to become an expert in the system is a tremendous investment. It’s not just a one-hour class. Extensive training and certification are involved. With companies our size or smaller, to become an expert in multiple systems would really spread our talent thin.
“Some people feel that offering more will get them more business, but by the time our company has grown to the size it is now, we have developed standards,” Travis continued. “Even though each system we install is different, by decreasing the degree of variation we are able to produce more systems in less time.”
There is still minor transitioning within Digitech, post merger, but the internal structure is firmly fixed. Monson still oversees technical operations. Moore manages the labor force, production and scheduling, as well as company safety; he supervises minutes and safety documentation in compliance with state code and requirements. Flescher manages electrical estimating and project administration. Travis oversees business operations-accounting department, purchasing department and the low-voltage project managers.
Digitech procures project leads through permits that are pulled, as well as advertising in local forums, but most leads come from a referral base from existing clients. Additionally, some of the company’s 2003 business has been harvested from companies that have ceased operation. The low-voltage landscape is still changing in the Seattle area, and when the economy is healthy, it’s conducive to strong growth. But when the economy contracts it purges the market; companies who are struggling buckle or are acquired. Because of its strength and scope, Digitech has not only weathered the storm, but continues to benefit from both hot and cold economic fronts.
Among the myriad factors that distinguish Digitech from its competition, it maintains a strong emphasis on customer service. “Reality states that there are not many disciplines we provide that our customers need (food, water, electricity, telephone, clothes) so we will execute our installations better than anybody!” stated Digitech’s chief technical officer, Jim Monson. For him, failure is not an option.
The unique hybrid structure of the company carries many advantages that Digitech owners perceive as edifying sources. For example, its hierarchical structure primarily emphasizes accountability.
“I believe when people are aware they cannot get away with mediocrity, the results speak volumes,” Monson said. “This may seem obvious; however, in this industry, generally, you have talented technicians who hold the owners at bay, creating a fear factor for the owners. The owners do not want to upset that/those technicians so they accept the ‘Prima Donna’ attitudes and forfeit the ability to enforce standards. That allows for mediocrity. We do not do that at Digitech.”
Hoping that some day the two companies would become one, the Digitech founders created it, from “day one,” as an electrical contractor. Thus, during the merger, it didn’t cost more money or bond to become certified electrical contractors. “We set up the structure for that purpose, originally,” Travis stated.
“When the companies operated separately, we had EL-O1 and EL-O2 (the electricians) and EL- 6 (the low-voltage technicians),” Travis continued. “As part of the merger we have initiated cross training; our low-voltage guys can get their electrical trainee cards, and our electricians can learn to pull low-voltage wires. They have had the authority in the past, but perhaps not the knowledge. We used to send out separate guys to perform separate functions, now we can just ask one electrician to make all the changes and pull additional wire.”
In April, Digitech sent eight of its electrical journeymen to Lutron’s HomeWorks training to learn how to build panel schedules via computer.
Electricians aren’t expected to be computer programmers, but by having them make lighting and program changes, Digitech expedites and streamlines the system installation process.
“One electrician can just take care of all those issues when he’s out there,” Travis said. “That’s where we jump from 80 percent efficiency to the high 90s.”
Despite dismal U.S. forecasts, especially in the Evergreen State, there are no signs of a business lurch for Digitech. It plans on cultivating its business to accommodate new projects, and having a “stable full” of technicians who will navigate through TCP/IP, or whatever future format the world of automation utilizes.
The company focuses primarily on residential installations, but also has plans to grow its percentage of commercial installations.
“We have an incredibly talented group of technicians and office staff that keep this customer service machine rolling,” Monson said.
Margot Douaihy is managing editor of Residential Systems magazine