CFO Studio magazine with Todd McElhatton

18 cfostudio.com FEATURED CFO SET FOR THE FUTURE BY JULIE BARKER F rom his office in Woodcliff Lake, NJ, Chief Financial Officer Ned Mavrommatis has a global view. He saw no geographic overlap between the markets of I.D. Systems of Woodcliff Lake and Pointer Telocation of RoshHaayin, Israel.The two companies had worked together for two years, with Pointer designing some of I.D. Systems’ products. IDSystems’ customers were concentrated inNorth America and Europe, while Pointer’s strongest markets were Asia and theMiddle East, and South and Central America. I.D. Systems, the company where Mavrommatis serves as CFO, provides wireless solutions for tracking the use of high-value assets like tractor trailers and forklifts. The Internet of Things (IoT) communications allow companies like Walmart to collect real-time information on whether tractor trailers are fully loaded or could be better deployed. That’s just one benefit. “If there’s freight in the container that needs to be kept at a certain temperature level, you can control and monitor the refrigeration, so you avoid spoilage,” says Mavrommatis. Like I.D. Systems, Pointer is focused on optimizing performance and profitability for customers. Strong in engineering, it builds IoT devices to help large organizations’ fleet management efforts, including stolen vehicle recovery. It also collects data on driver behavior in a test of smart cars for an insurance company. Creating smart communications devices that help in the checkout and -in of rental cars is a project the companies have worked on together for I.D. Systems client Avis Budget Group. In 2018, I.D. Systems’ revenues were $53 million; Pointer’s were $78 million. Size of client bases skewed in Pointer’s favor also, with I.D. Systems showing 250,000 subscribers and Pointer, 276,000. So was it audacious for Mavrommatis to set out to purchase Pointer? Making a Good Match “We had a relationship with Pointer where they were designing some of our products, so we got to know them very well over the last two years,” says Mavrommatis. Both com- panies had done acquisitions in the past, but this would be of a different magnitude. “We decided it made more sense to combine together and create a global player in the IoT space.” On March 13, 2019, the smaller company, I.D. Systems, announced a $140 million deal to acquire the larger. “It will give us the opportunity to bring Pointer products to clients in the U.S., and through the Pointer subsidiaries and network, we can bring our products to the rest of the world,” says Mavrommatis. “In addition, a Pointer subsidiary, Cellocator, actually designs and builds a lot of the products, so we will be able to take advantage of that. We’ll be vertically integrated, we’ll control our own supply chain, and we’ll be able to keep all the margin in the combined company family.” As to growth potential, Mavrommatis believes it’s big for I.D. Systems, as the U.S. transitions from the 3G to 4G and 5G networks (Verizon has said it will be out of 3G by the end of 2019 and other carriers are expect to follow within two or three years). IoT devices run on the cellular networks, and so that 3G sunset means “large companies that need to look at newer technology” will be in the market for state-of-the-art IoT devices, says Mavrommatis. “We believe with AN ACQUISITION OF A LARGER COMPANY BY A SMALLER ONE CREATED A NEW GLOBAL PLAYER IN INTERNET OF THINGS. MEET THE CFO WHO WORKED OUT THE DEAL Ned Mavrommatis, CFO