Applied Image Group grows with acquisitions

Lori Gable//May 19, 2000//

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A deal that might soon close in the Far East will make one Rochester company stronger than ever.
Bruno Glavich, president and CEO of Applied Image Group Inc., says this will be his first international acquisition. He will not disclose details until the deal is final, but he says the new purchase will be part of the fifth subsidiary of his 22-year-old company.
Glavich started his imaging and optics company with a plan to run his own business. The Rochester Institute of Technology graduate combined his love of photography with his expertise in photo science to create one of Rochester’s most successful small businesses.
“We are in explosive growth right now,” Glavich says. “Now we’re looking into overseas acquisitions.”
Glavich has grown his company steadily over the last two decades through a series of acquisitions. Some have been product-line purchases, such as his acquisition of a portion of PSC Inc.-then called Photographic Sciences Corp.-in the mid-1980s.
Other acquisitions have been whole company or division purchases, such as his buyout of Bausch and Lomb Inc.’s Thin Film Technology Division in 1997.
Each acquisition moves Glavich another step closer to his ultimate goal.
“We want to be the photonic department of every major corporation,” he says.
Today, many of the digital optic lenses used around the world are made by Applied Image. They include lenses in digital cameras, light components in a car’s brakes and optics used in plastic windows for grocery bar code scanners.
The widespread use of products manufactured by the firm shows the potential for growth. Glavich has big plans for his business.
“Our focus is not to be a company,” he says. “Our vision is to be a single source photonic provider.”
Glavich currently manages four subsidiaries under Applied Image Group. He began his company in 1978 with the imaging division, which manufactures imaging components such as test targets.
The company grew with the acquisition in the early ’90s of a product line from Leica Inc. This purchase led to the creation of the Applied Image Group/Glasstec, which makes glass ball optics and microlenses.
The third subsidiary, Applied Image Group/Coatings, came from the acquisition of Bausch and Lomb’s Thin Film Technology Division. This was Glavich’s first company acquisition. Up until this point he had acquired only product lines.
The coatings subsidiary makes coatings used in light reflectives.
The fourth subsidiary is Applied Image Group/Optics, which manufactures plastic refractive and defractive optics used in digital cameras. It stems from the acquisition of Tucson, Ariz.-based Donnelly Optics Corp. in 1998.
As Glavich’s company grows through acquisitions, so does his employee base. He tries to keep the employees from the companies he acquires.
Currently, Applied Image employs 300 full-time workers. There are several other part-time and temporary employees as well.
Keeping workers from other companies can be a downside in an acquisition strategy.
“There is a culture in each company, and sometimes people are resistant to change,” Glavich says. “I believe it is best to keep employees from the companies I buy, but sometimes they are not a good fit, especially in higher levels of management.”
Employees on the production line can pose a different problem. The cost of labor in the United States, compared with that of other countries, is one of the biggest obstacles Glavich has to overcome to remain competitive.
But that does not mean he is going to re-locate his operations to Mexico or overseas.
“We are building our photonic platform here,” he says. “We do the part of the business here that we can; other parts may have to be based throughout the world.”
Glavich says when he decides to make a new acquisition, he always has to consider how it will grow his base in the industry.
Identifying sources of financing is a key part of any company’s acquisition strategy.
Lori Green, a partner in the business group at Nixon Peabody LLP, handles mergers and acquisitions for several local companies. She says financing an acquisition with stock often can be difficult for small companies, because it may be tricky to put a value on their equity. Thus, many small businesses look to venture capitalists.
“This is a more expensive way to get financial backing,” Green says. “Private investors take risks and expect to be compensated for that.”
Often, venture capitalists will get a bigger return on their investment than a bank would get. Private investors expect paybacks such as stock in the company, board seats and dividends.
But it can be a great way for a small company to afford the acquisitions it needs to grow.
Doyle Security Systems is just one example. Green’s firm helped the company grow through acquisitions from a small, privately held company to a larger business that is now public.
Glavich says he has learned a lot through the years about running his own company. He learned one of his biggest lessons through one of his biggest mistakes.
“A friend in business once told me, ‘You can take your existing product into a new marketplace or you can introduce a new product into an existing marketplace, but you can’t do both,'” he says.
But Glavich did not listen. He took a product he did not know-printed circuit board designs-into a marketplace he did not know, that of electronic designers. He says it took him two years to realize his mistake and five years to recover from it.
Glavich continues to learn as he goes. He has built Applied Image Group through strategic acquisitions, each of which has enabled his company to move toward becoming the top supplier of imaging and optics products he believes it can be.
Revenues for Applied Image are doubling every year. Glavich says his plan is to double revenues every year for the next five years.
In addition to the deal in the Far East, he is looking to buy two other U.S. companies this year.
Is he simply buying up the competition? Glavich says no.
“I’m gathering the pieces I need to continue building the world’s strongest photonic platform,” he says.
(Lori Gable is a Rochester-area free-lance writer.)