Hot on the heels of adding Light & Sound Design (LSD) to its stable of companies, the Production Resource Group (PRG) announced in late June that it had acquired lighting and systems integration leader Production Arts (PA). In a statement released by PRG, its CEO, Jere Harris, said, "We are thrilled to add the products and services of Production Arts to the resources PRG has to offer the marketplace. Both PRG and Production Arts have taken similar approaches to the market with a strong focus on embracing new technology with great customer service."
With the acquisition, the systems group of PA, led by the company's executive vice president, Steve Terry, will become the lead member of the newly established PRG Systems Group. Terry has another new role at PRG: president of the company's lighting group.
He was appointed to this post as part of a recent reshuffling of the lighting group's executive management team. Don Stern is now chairman of the PRG Lighting Group; Nick Jackson, working alongside Terry in running the group, will continue as president of LSD (and develop the international side of the business); Bill Ennis is the group's CFO and executive vice president; and Bill Gallinghouse has been appointed senior vice president of sales and marketing. The group consists of PA, of New Jersey, Los Angeles, and London; LSD, of Los Angeles, Nashville, London, and Birmingham, England; Bash Lighting Services of New Jersey, Las Vegas, and Baltimore; Vanco Lighting Services of Orlando; Cinema Services of Las Vegas; and Lighting Technologies of Atlanta.
Terry addressed these sweeping changes in a recent discussion. First, why did PA, with 20-plus years in the industry, agree to become part of PRG? "The market dynamic has changed: the larger companies were becoming our competitors, and we said, 'Do we really want to be out there as an independent company, or is there more synergy in us being part of a larger organization?' We felt the time was right to get together with PRG," adds Terry, who says discussions began in earnest in January after two years of "on-and-off" consideration. "We've worked as a subcontractor to Harris Productio n Services [part of PRG] on a number of projects, so we all knew each other. Another strength for us is that we are exclusive US importers of European equipment like Pani, Robert Juliat, Avenger, and E/T/C Audiovisuel; being part of PRG will give those products wider geographic distribution."
"Production Arts specializes in certain areas that PRG does not, like our systems work," Terry adds. "The synergy comes in projects, whether rental or sales, where we can take these areas of expertise that PRG and PA have--sound, lighting, scenic, and systems integration--and put them together. We want customers to single-source a lot of this, as the best of it is now available under one roof. That's never been done successfully in this country."
But some designers prefer to shop around. And there is a groundswell of concern that bigger is not necessarily better--that a monolithic PRG, comprising almost a dozen companies, will be able to dictate prices. "Our customers viewed this acquisition with caution," Terry says. "They didn't embrace it immediately; they wondered if it meant less competitive pricing and less choice. PRG is a big company, yes, but we are not going to throw our weight around. We want to maintain the same level of customer service that we achieved at the Production Arts scale, roughly 1/8 the size of PRG [a $200 million company] in dollar volume. There's a strong commitment on the part of Jere Harris to do this. The appointments to the management team reflect that; it's all very well to pay lip service to business-as-usual and say nothing's going to change, but that's not the case. It's not business-as-usual; in my view, it's going to be a lot better than business as usual."
Terry says the lighting market was getting to be a "rough-and-tumble place" for a small company; "and Production Arts, at $25 million a year, was beginning to feel like a small company. The downward spiral of margins in our industry over the last five years has left the pot for creativity money pretty lean. We felt the time was right to move to that level of financing and corporate size to continue to give back to our customers, the industry, and the market. As lighting systems get more and more expensive and the capital acquisition costs of them go from a typical show having $100,000 worth of equipment to $1 million, the whole paradigm of how the lighting rental industry works changes. This is what's breeding this movement toward larger companies; to service the market adequately, you can no longer get a garage and $50,000 and say, 'Let's start renting it.' The capital costs are so huge, a different level of financing is required--a level of financing that only a company the size of PRG has access to."
Terry says PRG plans to make itself a more comfortable place for one-stop shopping. "While the size of PRG looks daunting--the number of locations, the amount of equipment--there is a strong commitment on the part of every company manager to make it feel like a small company to our customers. I believe we're going to be successful in doing that."
This reshuffling of the executive team, he says, is "a strong statement" on PRG's part regarding customer security. "We're picking the best characteristics of each company--like customer service--and putting the management in place to implement them in the PRG framework. We're asking, 'What kind of character do we want the PRG lighting division to have in the marketplace?' We'll retain the best parts of the brand identity of each company."
Terry says that within a year, PRG teammates PA and Bash--both based in northern New Jersey--will likely be merged in the same facility. The old rivals, he says, are "adjusting to no longer competing on bids." As for his transition from independent to corporate employee, he says, "If you had asked me six months ago, 'Do you want this job?' I probably would have said no; my concentration has always been in a much narrower focus. But frankly, I'm pretty excited about it. The teams that are out there in all these companies are pretty wonderful."