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A new investment horizon

Telestream announced earlier this month that it is to be acquired by private investment equity firm Genstar Capital. TVBEurope caught up with Dan Castles, founder and CEO of

Telestream announced earlier this month that it is to be acquired by private investment equity firm Genstar Capital. Holly Ashford caught up with Dan Castles, founder and CEO of Telestream, to discuss the development and what it will mean for the company’s future.

Telestream is a provider of live and on-demand digital video tools and workflow solutions, founded in 1998 by now chief technology officer Shawn Carnahan, and Castles. Three years ago the company was acquired by private equity firm Thoma Bravo and this New Year saw an agreement by a new private equity firm – Genstar Capital – to purchase the company. Telestream and Genstar had worked together previously, “know each other well” and are located just four blocks away, says Castles. The acquisition is mutually beneficial, Castles continues, stressing it as “a chance for them [Genstar] to monetise the investment and for us to begin a new investment horizon with another financial firm.”

Genstar is a relatively small firm and an investor in middle-market companies and as such, says Castles, Telestream’s size “fits their portfolio spot on.” With Genstar helping Telestream’s management to “focus on the top line”, Castles hopes to be able to accelerate existing projects, spend more on engineering and act “more aggressively” on the enterprise and desktop side of the business. He also hopes the acquisition will allow the company to revisit, re-open and re-examine opportunities that were not possible before.

Announcing the acquisition, the company claimed that its growth and profitability has consistently outpaced the market. Castles explains: “We’ve grown every year for 17 years and the last couple of years – because of a lot of our product launches – they’ve torn up the track, done very well.” The courtship between Telestream and Genstar started a year ago, when the private equity firm were on a “fact-finding mission”, asking: “ ‘what kind of growth rate can this market support?’ This ‘growth and profitability were apparent to Genstar, which saw the rate at which Telestream’s results coming in, continues Castles, and “it was the extension of that rate into the future that really excited them.”

Genstar saw how it could add value to the company, but was not driven purely by cold, financial gain. “On an individual level they wanted to feel as though they could contribute to our success and look back three or five years from now and see it as a new chapter in the growth of Telestream and see their fingerprints on it,” Castles says.

What will contribute to this predicted success? Will Telestream invest in current products or expand into new areas? Or, with Genstar’s backing, have the potential to do both? Yes to both, says Castles. He uses an example Vantage, the company’s family of video transcoding and workflow automation solutions. If the company had gone into year four with financial firm Thoma Bravo, it would have faced the situation of “‘lets play out the hand you’ve got’”, but instead, says Castles, starting in year one with Genstar means that situation has evolved into one of “‘lets think outside the box’”. As a result, Telestream will create new extensions of Vantage, “leveraging what we’ve got”, as well as new organic products and “inside a year, I hope you’d see an M&A deal too.”

This is all good from a product perspective, but how will the acquisition affect things on a personnel level? One “very exciting” outcome is the double addition to Telestream’s board of directors. These two industry figures will be engaged and involved in product discussions, which is something the company has not benefitted from for the last three years: Castles admits the board has been “a bit of a benign group focussed on numbers.” The announcement of exactly who the figures are will be announced “in the next 45 days”, but Castles promises “a major customer, major player or a well-connected person,” to help resonate and challenge the company’s thinking.

The other people involved in the recent deal are, of course, Telestream’s customers, who Castles describes as “the most priceless things we have”. “We don’t want customers to think we’re about to make some sudden turn and leave them in the lurch,” he continues, and he is adamant that there is no fundamental shift, no dramatic change, and no sudden difference in the products customers use. The deal has been “seamless” Castles assures, and the management team will remain 100 per cent the same.

He exudes enthusiasm for the deal, and concludes: “It’s positive for the people who believed in it three years ago, its positive for the employees, and we hope that over the next five years it’ll be positive for our customers, who will see additional things we’ll bring to market as a result.”