Testing the cable industry
Entrepreneur sold his company, but stayed on and tripled sales

Things had never been better for Raffaele Gerbasi. Avantron Technologies, the cable-testing equipment manufacturer he founded, had increased revenues several years in a row. His employees were happy and the company had just moved into new 22,000 square foot premises.

Then the phone rang. "We'd gotten calls from buyers over the years who came and kicked the tires, but I was so busy I didn't have time to go through it again," Gerbasi said. "I was happy with the way things were going."

However the caller, Paul Chang, president and chairman of Sunrise Telecom, made Gerbasi an offer he couldn't refuse. He proposed buying Avantron for U.S. $11 million in cash, and Gerbasi could stay on and run the division pretty much as he always had when he was still the owner.

After consulting family members and a couple of key employees who held minority stakes, Gerbasi decided to sell and he agreed to a two-year management contract with the new owners.

Signing ex-owners to a management contract is a standard way for companies making acquisitions to protect their investments by locking up managerial talent. But unlike many entrepreneurs with newfound wealth, who count the hours until their contracts expire, Gerbasi put his heart into his new job.

"The money was more than I ever dreamed of." Gerbasi said. "It's enough to take care of me, my family and probably even my grandkids (if we ever have any), for the rest of our lives. But I love this industry and the people, so I decided to stay active."

For Sunrise Telecom, it's a good thing he did. With the plunge in telecommunications investment after the tech-bubble burst, its new cable products division became the company's fasted growing, shooting from 2.0 per cent of sales in 1999 to 33 per cent in 2002.

Under Gerbasi's guidance, the division, now known as Sunrise Telecom Broadband, saw revenues more than triple, from U.S. $5.5 million during 2000 to U.S. $17 million in 2002, and the number of employees jumped from 35 to 80.

Much of the success can be attributed to the financial strength that comes with being part of a larger organization. The U.S. parent Sunrise Telecom, went public at the height of the Internet boom, and was flush with cash to invest in product development and new acquisitions.

As an independent company Avantron focused narrowly on the high-end digital spectrum analyzer market. But with the financial backing from Sunrise Telecom, Gerbasi was able to broaden the product line by integrating two new companies into the division.

In September 2001 Avantron Technologies merged with Hukk Engineering. And in March 2002 Gerbasi led the acquisition of CaLan, from Agilent Technologies, a Hewlett Packard spin-off. With CaLan's mid-range network products, and Hukk's lower-priced hand-held devices for checking home and office cable connections, Sunrise Telecom Broadband, now sells cable operators such as Montreal-based Cable VDN a full range of testing, monitoring devices.

"He has got an excellent product line and a great bunch of guys working for him," said long-time customer Philip Gale, Cable VDN's president. "Their products have integrated software packages which make them easier to use, and they provide good support. If the stuff craps out, they give you a loaner right away."

A big coup for Gerbasi was ensuring that operations remained headquartered in Montreal, where more than half the company's workers are now based. But Gerbasi is flexible about allowing employees to live where they want, as long as they can do the job.

For example Gerbasi was able to recruit CaLan's founder, long-time industry veteran Syd Fluck, who retired, after having sold the company to Hewlett Packard during the 1990s. But Fluck, who handles strategic product development, preferred to operate from Milford Pennsylvania.

"When Ralph called asking me if I wanted to "have some fun," I jumped at the chance," Fluck said. "The only thing I told him is that I wanted as little to do with Canadian winters as possible."

According to Tim Hermes, publisher of Communications Technology magazine, who has been following Gerbasi's career for almost a decade, a big part of his success can be attributed to his ability to penetrate the U.S. market, which now comprises more than 90 per cent of sales.

"The U.S. cable industry has a long tradition of favoring (domestic) suppliers," said Hermes. "The fact that (Raffaele) was able to come down and convince these guys that his products could do the job speaks to his aggressiveness."

Despite strong competition from chief rival Acterna Corporation, which holds a dominant position in the industry with more than half the market share, both Gerbasi and Fluck are optimistic about the future.

Acterna recently went into Chapter 11 bankruptcy court protection, and although the company will likely eventually emerge, these reorganizations tend to take management's eye off the ball, and Sunrise is ready to pounce.

The company is preparing a new generation of products, featuring the Windows CE operating system, which Gerbasi claims provides users greater functionality and ease of use.

In fact Gerbasi is so convinced about the opportunities ahead that earlier this year when his two-year management contract expired, he agreed to extend it indefinitely.

 

 

Photo caption: According to Raffaele Gerbasi, general manager of Sunrise Telecom Broadband division, shown here with a CM1000 digital network analyzer, selling your company to a larger player can be a great step for an entrepreneur - if there is good chemistry with the new owners.

 

Sidebar: Getting ahead

o Gerbasi founded Avantron Technologies with several partners in 1984, and built the business gradually, becoming president and sole owner in 1987. The company grew throughout the 1990s, slowly gaining acceptance from key U.S. customers.
o In January 2001, after talking to several suitors during the previous years, Gerbasi finally sold Avantron to Sunrise Telecom, agreeing to stay on as president for two years.
o Gerbasi's first step was to integrate two competitors into the division, Hukk Electronics and CaLan, enabling the group to market a full line of cable testing equipment.
o Gerbasi reinvests close to 25 per cent of revenues in research and development, including a new generation of products that feature the user-friendly Windows CE operating system interface.

Peter@peterdiekmeyer.com

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