ICS Telecom Inc., a player in the voice and data services market since 1976, has agreed to be acquired by Frontrunner Networks Systems Corp.
I.C. Shah, founder of ICS Telecom, would not give financial terms of the deal but said it was finalized July 6 after four to six months of negotiations. ICS Telecom now becomes a wholly owned subsidiary of Frontrunner Networks.
"Once I was able to see the potential synergy between the two companies and when I met with the leadership involved, everything just made sense," he said. "The companies had the right chemistry and similar cultures."
Frontrunner's roots in Rochester also trace back to the late 1970s. As Rotelcom Inc., the company was a subsidiary of Rochester Telephone Co., which became Frontier Corp. Frontrunner spun out of Frontier in 1998. It was acquired by Williams Telecommunications, based in Mississauga, Ontario, Canada, in 2008 and now specializes in providing communications and IP security equipment to business clients.
The deal aligns the firms' services. Jim Williams, CEO and president of Williams Telecommunications, said plans call for Frontrunner and ICS Telecom to operate as is with their current employees and leadership teams intact. The companies may merge offices and could look to unite under one name.
Frontrunner's headquarters is on Linden Avenue. ICS Telecom is located on Fishers Station Drive in Victor. Both companies declined to give specific revenue figures or current employment totals.
In the most recent Rochester Business Journal list of Internet service providers, ICS Telecom reported having 35 local employees.
Jim Keegan, vice president and general manager of Frontrunner, said the two companies have been sharing resources for the better part of a year. The acquisition allows Frontrunner to further expand its services to ICS clients.
"We can now take our growing wireless solutions business and deliver it to ICS clients," Keegan said. "We have also started an IP security business at Frontrunner that will go into the ICS space, which will increase the security part of our business."
Raj Shah, CEO of ICS Telecom and son of I.C. Shah, said ICS Telecom also will see the benefits as the company looks to grow two of its biggest segments.
"We've been in the cloud space since the summer of 2011," he said. "That's a growing area that Frontrunner clients now have access to. The same goes for another emerging part of our business, which is with the federal government."
ICS Telecom's federal government business has been on the rise since 2001. That year, the Sept. 11 attack on the World Trade Center left the Department of Justice's Manhattan office without phone service.
ICS Telecom had a Justice Department customer in a Brooklyn office. The firm decided to route the Manhattan office's calls to Brooklyn. Federal officials were impressed with the company's work and awarded ICS Telecom a national contract a year later.
For Williams Telecommunications, the acquisition of ICS Telecom is part of a large expansion plan. Since the early 1990s, the company has built its business as a distributor of communications equipment from manufacturers such as Avaya Inc. and Nortel Networks Corp. to business clients in the U.S. and Canada.
CEO Williams said the acquisitions of ICS Telecom and Frontrunner in 2008 further his company's goal to increase market share in the Northeast. Williams said the two companies can now cross-sell their product lines to all Williams Telecommunications clients.
His firm also is growing in the West and Midwest, particularly in Utah and Wyoming. Next up, he said, will be expansion in the Southeast, with a focus on Virginia and Florida.
"For years, we've had more of a distribution model where we supplied companies like Frontrunner and ICS with their hardware," Williams said. "With the economy changing and turning around in the U.S., we saw this as the perfect time to increase our market share and grow with the economy."
While I.C. Shah admits the deal seems like a great fit now, negotiations took six months in part because of the deep emotional attachment he has for the company he founded more than 35 years ago.
"I'm the first one to admit, having started the company in 1976, it felt like I was giving up my firstborn with this acquisition," Shah said. "In fact, I sort of am giving up my firstborn, who will now be working for Williams Telecommunications."
Shah founded the company as ICS Executone shortly after the court-ordered breakup of AT&T Corp. created a competitive U.S. telecom market where only a government-regulated monopoly had existed before. ICS was one of the first firms to sell phone systems to businesses locally.
Shah grew the company to more than 90 employees and completed a buyout of distributors in Buffalo, Syracuse, Geneva and Binghamton. Employment fell over the years to fewer than 40 in 2009 and to some 35 workers at the start of 2012.
Shah announced his retirement in 2009 and said he has since served as an adviser to his son Raj. The elder Shah said he is proud of the acquisition and the impact it will have.
"Frontrunner and ICS over the years have been two very respected and well-known companies," he said. "We are two very big names in the industry that will now become one powerful force."
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