By now, everyone has heard the big news of Black Dragon Capital’s announced acquisition of leading broadcast and post-production hardware & software manufacturer Grass Valley.
Belden Inc., a leading global supplier of specialty networking solutions, engaged in the signing of a definitive agreement to sell the Company’s Live Media business (“Grass Valley”) to Black Dragon Capital, a private equity firm with a focus on technology investment opportunities in disrupted industries.
Black Dragon Capital is a growth-driven private equity fund with a focus on technology investment opportunities in industries disrupted by the impact of digitization on individuals, groups and enterprises such as retail commerce, financial services, healthcare, and sports and media. Their goal is to help build market leading companies that outperform their peers over time and solve their industries’ more significant issues. Black Dragon’s management and financial expertise enhances its ability to advise and mentor high-performance business operators. Black Dragon believes the entrepreneurial spirit should be nurtured through example, and believes the best understanding of the entrepreneurial dream comes from peers who have “walked the walk and talked the talk.” A team of highly experienced and accomplished operational executives, who have track records of success that encompass early stage to multiple billion-dollar organizations in both public and private entities and thus are able to provide above market investment returns, form the foundation of this minority-led firm.
Louis Hernandez, Jr., former Chief Executive Officer of Avid Technology, Inc. (known simply as Avid), is Founder, Managing Director and CEO of Black Dragon Capital. This San Diego State University Alum is also known as an investor, thought leader, philanthropist and author, with books including:
Too Small to Fail: How the Financial Industry Crisis Changed the World’s Perceptions (2010) Based upon the financial meltdown resulting from the subprime mortgage fiasco that culminated in the most dramatic economic slowdown since the Great Depression, Hernandez outlines a process to map the future direction of individual institutions and the industry in a way that addresses near-term issues and overarching global changes, such as a re-emergent Asia and the dynamics of a knowledge economy.
Hernandez puts forth another comprehensive vision for our future that aims to advantage all while disadvantaging none. Hernandez envisions a streamlined world of shared platforms and common standards that empower storytellers, developers, and deliverers alike. By dispensing of business models that have proved unviable in the digital age, he believes in the ability to turn higher profits while more equitably compensating creatives and creative endeavors.
The Black Dragon principals and advisors involved in the Grass Valley acquisition include Hernandez; Mohamed Abuagla, former EVP and CTO of Al Jazeera and Advisor; Dr. Andreas Bereczky, former SVP and CTO of ZDF Germany and Advisor; Peter Neothen, CEO of Quest Media GMBH and Advisor; Gary Bettan, CEO of Broadfield Distributing Inc. and Advisor; Sandy Nassari, Founder and CEO of Melrose Inc. and Advisor; Shengli Han, Vice Chairman of Beijing Jetsen Technology and Advisor; Frank Capria, media product specialist; and Mo Hussein, media finance professional. Several other executives who worked at Avid with Hernandez were involved in the company assessment and strategy. The Black Dragon transaction team was led by Tim Greenfield, Partner, and Dan Consigli, Partner and CFO.
As a side note, Jeff Rosica, current Avid CEO who replaced Hernandez, served in various capacities with Grass Valley from early 2002 until he joined Avid, and was its Executive VP, Chief Sales and Marketing Officer. He started at Avid as Senior VP of Worldwide Field Operations in 2013, was appointed Senior VP, Chief Sales and Marketing Officer in early 2016 and in December 2016, he was appointed President.
Tim Shoulders, current President of Grass Valley, will continue in that capacity. “Black Dragon’s appreciation of the market and knowledge of our customers also means that our legacy product lines that are so essential to producing and distributing exciting high-quality live productions world-wide are in good hands,” says Tim Shoulders. “I expect the change to be seamless for our customers and their day-to-day interaction with us.”
Grass Valley empowers customers to create, control and connect content wherever, however and whenever it is consumed. Live products for use in mobile trucks, studios, arenas, stadiums, houses of worship or any other live production venues; production products for the newsroom or the studio, from Main Street or the other side of the world; playout products featuring automated distribution of different channel types or more specific programming, with on-premise, cloud or hybrid solutions for delivery; processing products with industry-leading audio and video signal management and monitoring capability; and routing products from compact routing to the largest networks in operation are just some of the areas of expertise Grass Valley helps its customers to create and support new workflows while continuing to operate legacy workflows, simultaneously broadcasting through traditional channels, Over-The-Top platforms, and Video-On-Demand as well as to tablets, PCs, and mobile devices.
“Grass Valley is, of course, an iconic brand that everyone knows. The other thing about Grass Valley is that it has this very comprehensive product suite that goes screen-to-screen, which very few companies can claim in the market today and I think (that) puts it in position to really help in ways a lot of companies cannot; it has great distribution all around the world, it has some of the biggest and best known brands and newest brands, as well,” states Hernandez. “We’re excited by the opportunity Grass Valley has to lead in an industry where other heritage brands have struggled. Grass Valley’s investments in cloud-based and Software as a Service (SaaS) solutions are promising. We believe the combination of a broad product suite, a great team and the direction of the market will make Grass Valley the partner of choice as the digitization of the space accelerates.”
Belden announced its plan to divest its Grass Valley business on October 30, 2019, according to Joe Zaller of Devoncroft Partners, LLC. Zaller states that Grass Valley “has a business model centered on an expensive direct sales model, deploying capital equipment. The business or a meaningful portion of the business will need to transition to a fundamentally different business model in order to have success deploying technology in virtualized environments. Those business models will be characterized by pricing models based on subscription commitments and pay-per-use. The inescapable impact is a short-term impact to revenue and the need to make significant investments to restructure the business around those new revenue profiles.”
Belden had been frustrated with the unpredictability of demand in the broadcast sector and had an intention to restructure its portfolio for a while. Zaller quotes Belden CEO John Stroup expressing the frustration. “Quite frankly, what we find in this business [broadcast], particularly North America, is a lot of lumpiness, a very difficult time being able to accurately predict when demand is going to occur. It’s harder to forecast and it’s creating surprises when obviously we don’t want them.”
Black Dragon’s Hernandez opined, “We see tremendous opportunity for transformation in the media technology market and believe that Grass Valley is in an ideal situation to lead the market through these changes. Under Belden‘s leadership, the Grass Valley solutions portfolio has expanded and the business has developed a discipline that puts them in the upper quartile of the market in profitability. Black Dragon’s experience leading companies through digital transitions will allow Grass Valley to accelerate the next step in its evolution, bringing more innovative products to market faster.”
Shoulders shares this vision, but does so from a customer’s perspective. “The opportunity we have at Grass Valley is we know so many different parts of the workflow that we can stitch together what I would call the broadcast factory and help our customers capture images, edit images, store images, and deliver media to air in the most cost-effective and most secure way.”
“Grass Valley has led the market in the transition from SDI to IP and has been diligently pivoting our product lines to cloud-based and SaaS solutions,” said Shoulders. “Black Dragon brings the expertise and vision that will allow us to accelerate this transition to the benefit of our customers who are looking for more robust and flexible models for content production and delivery. We’re excited to bring our customers along with us on this journey.”
“We are very pleased to partner with Black Dragon Capital. Their deep media-related expertise, proven track record and relationships in the broadcast community make them the perfect partner to drive Grass Valley to the next level. We are excited to be part of the partnership,” states Stroup.
The transaction is expected to close into completion after customary regulatory approvals.