Vancouver: Steven McDonald and Crawford Hawkins thought they were raising $3.5 million in debt financing to purchase the equipment that would take dated Telepost Film & Video into the high-definition future. Instead, the public company principals bought competitor Finale Editworks for $500,000 in shares and convertible debt and assumed the debt.

The transaction, announced in late August and expected to close by Oct. 15, is being described as the best fit of competitors in Vancouver, with the two companies offering each other complementary services and the chance to grow faster together.

In the deal, Telepost – which had fallen behind the market of late and is known primarily as a video duplication house – acquires not only Finale’s equipment, but also its sound and video expertise and brand name. Finale, meanwhile, hooks up with the well-connected Telepost president Hawkins (a founding father of the local film industry) and gains access to public funds.

‘We’ve ended up taking a different route to hd,’ says Steven McDonald, chairman of the board at Telepost. ‘This opportunity for Finale came along and allows us to reach our goal faster – to reach critical mass much faster.’

In recent years, Telepost has remade itself to get ready for this new growth strategy, having downsized, become focused on a core service and, after years of operating in the red, posting a modest profit.

‘We are a public company,’ says McDonald. ‘We have an obligation to grow the company in the most profitable way possible. We believe that will come from internal growth and external acquisition.’

Acquiring Finale also eliminates a competitor from the market, he notes.

The amalgamation of Telepost and Finale will create the fourth-largest post-production house in Vancouver behind Rainmaker Entertainment, Northwest Imaging & FX and TOYBOX West.

As a combined company, Finale keeps its brand name while Telepost evolves into the publicly traded holding company for Finale and an as-yet unnamed video duplication company. Telepost will move into the Finale office space on West 2nd Ave. in Vancouver.

McDonald says there will be no job losses. ‘Where we get synergies [through the amalgamation] is in the consolidation of office space and in selling off excesses, such as our analog equipment.

Other Finale assets, including broadcast equipment rental company Shooters and visual effects company Imagine Engine, are not included in the merger and will be spun off as independent companies still owned by Finale partners Don Thompson and Dale Johannesen.

‘To reach our potential, we needed to look outside the company at other resources,’ says Thompson, who remains as president of Finale. ‘We wanted the talents of Crawford Hawkins, who has deep contacts in the industry here and in Los Angeles. And we wanted the new capital a public company can bring.’

Recent post-production credits for Finale include Forefront’s Magician’s House and the Disney mow Up, Up and Away.

Finale’s move into film transfer, however, has been costly and has contributed to the company’s debt position.

‘There is a need for consolidation and expansion in our industry,’ Thompson observes. ‘We’ve had a stagnant market for 10 years. That’s why we moved into film transfer. It has been a challenge for [competitor] Northwest and ourselves to break down the relationships created by Post Haste [now toybox] and Rainmaker.’

Finale and Northwest operate without the benefit of labs such as those run by Rainmaker and toybox. Thompson doesn’t rule out the creation of a third lab in Vancouver.

Thompson, meanwhile, adds that the amalgamation is also a defensive tack to protect against the expansion of American service companies that have been looking to acquire Vancouver companies or open branch plants in order to recoup some of the runaway business.

Telepost shares, trading on the Vancouver Stock Exchange, closed Aug. 30 at $0.20. The year high is $0.30 per share and the year low is $0.14 per share.