Westlake Village-based Intellisys Group, which over the past decade had built itself into one of the nation’s leading servicers of audio-visual equipment, has financially hit the wall and will likely be acquired out of bankruptcy on Nov. 13 by Dayton, Ohio-based MCSi Inc. The turn of events follows an aggressive expansion program undertaken by Intellisys in 1998, under which it acquired seven regional audio-visual companies. The expansion was apparently too much, too fast. After generating $100 million in revenues last year, Intellisys laid off 150 employees in September, filed for Chapter 11 bankruptcy protection in October, and then agreed to be acquired by MCSi. According to its bankruptcy filing, Intellisys has total liabilities of $50 million and total assets of less than $25 million. The acquisition is still subject to approval by a judge at a bankruptcy hearing set for Nov. 13. Neither MCSi nor Intellisys would disclose the price that MCSi has agreed to pay for the acquisition. Intellisys paints a dire picture of its situation in court documents. It claims it is close to running out of money to pay its remaining employees and could have trouble completing work already promised to its 200 customers if the sale is not completed within 30 days of its Oct. 16 bankruptcy filing. The deal with MCSi is expected to preserve most of the remaining sales and technical staff, combining offices in communities where both companies now have branches. Intellisys has 14 offices in Western states and two Eastern states. MCSi has 126 offices nationwide. Both companies install equipment for company meeting rooms that allows people to connect to satellite offices as well as give broadcast and computer presentations. “The bulk of our employees and offices will remain intact,” said Intellisys CEO Mike Gummeson of the planned acquisition. Intellisys has 500 remaining employees who would be affected by the deal. According to Intellisys’ bankruptcy petition, the company expects about 400 of them to keep their jobs when the company is merged with MCSi. Started as a distributor of overhead projectors to schools in the 1970s, Intellisys moved into the high-tech end of the audio-visual equipment world in the early 1990s and began targeting business clients. The company’s client list includes such big names as Microsoft Corp., Nortel Systems, Sun Microsystems and Intel Corp. “We had an A-plus client list and we were very well known,” said Gummeson. That is part of the reason MCSi was attracted to Intellisys in the first place, said MCSi Chief Financial Officer Ira H. Stanley. “Their salespeople know the business and the industry, and they’ve attracted customers like Nortel Systems, Fortune 500 companies, Stanford University and others,” Stanley said. “Their sales department has overseen an internal (annual) growth rate of 30 percent over the last five years.” In 1998, Intellisys began an aggressive acquisition effort that allowed the company to broaden its presence along the West Coast and into Massachusetts and Georgia. That expansion effort is what led to the company’s bankruptcy filing, Gummeson said. The company also spent heavily to revamp and fix its accounting system in 1999. “Those two factors drove our need for additional money,” said Gummeson. “We were growing very quickly.” In August, Intellisys enlisted the help of an investment bank to seek out enough financing to keep the company afloat. Intellisys was unable to secure more money, but did find MCSi, which was interested in buying the company. MCSi has become one of the country’s top audio-visual servicers, with 1999 revenues of $850 million. Over the last year, the company has been on a growth spree of its own, buying up smaller audio-visual players, Stanley said. “(MCSi) has been evolving into a company with significant business in audio-visual systems integration,” Stanley said. Stanley said MCSi decided to acquire Intellisys for two main reasons: its trained sales and technical staff, and its top-of-the-line client roster. “Intellisys has a lot of good people who are dedicated to this business,” Stanley said. “They’re a good fit for us.” Details of the deal are still being worked out, Stanley said.
