Audio’s transfer window

In most professional team sports, the transfer of talented and extraordinarily well-paid players from one club to another takes place within an allotted time. In baseball, basketball, (American) football*, and hockey this is known as the ‘trading deadline’, while in soccer it’s commonly referred to as the ‘transfer window’. It seems we are in the middle of audio’s transfer window.

On Tuesday May 6, French investors Naxicap Partners and French private equity firm Aquasorca announced they had acquired a majority stake in the Focal & Co group. This includes French loudspeaker specialist Focal and UK-based electronics experts Naim Audio. The Focal & Co group will now be known as the Vervent Audio Group (VAG), and Focal founder Jacques Mahul will step down as chairman, taking on the role of brand ambassador.

This morning (May 8) in New York, Fine Sounds Group has announced a management buyout, involving Mauro Grange (CEO, Fine Sounds SpA) and Charlie Randall (President, McIntosh Laboratory, Inc), together with two European private equity firms, LBO France and Yarpa. They are purchasing the Fine Sounds Group from Milan-based investment firm Quadrivio, which has owned the group since 2008.

This second transfer will see the Fine Sounds Group headquarters relocate to New York City, with Grange as Group CEO and Randall as Group COO (while continuing as President of McIntosh). The Fine Sounds portfolio of Audio Research, McIntosh, Sonus faber, Sumiko, and Wadia Digital remains extant.  

Both these transfers of companies will cause the inevitable hand-wringing from the doom-mongers. In fact, such doom-mongering has already taken place on UK audio forums with regard to the Naim and Focal transfer of ownership, and the new investors appear to have been blamed for practically everything from the current direction of Naim and Focal to the casting of Ben Affleck as Daredevil. Expect the same ‘all is lost’ cries over companies in the Fine Sounds group.

The fact is, in business, these things happen all the time. We’ve lost sight of this, because a lot of the audio world is too small to be involved in this kind of transaction. However, when a company or group of companies gets large enough to be of interest to private equity and investment companies, they are traded like soccer stars. This may sound utterly horrible to those who want their beloved firm to remain a bunch of artisans, hand-crafting fine products with love, but it needn’t be an impediment to that kind of product.

It’s easy (and, thanks to the internet, standard operating procedure) to point out all those companies that were taken over, stripped of their assets, or reduced to some lowest common denominator. In the UK, Rogers Loudspeakers is usually rolled out as an example of the worst excesses of despotic corporations sucking the marrow off the bones of once-great brands. Rogers was the go-to brand for BBC-style loudspeakers (including the famous LS3/5a) through much of the 1970s and 1980s. When BBC-style loudspeakers dipped in popularity in the mid-1990s, Rogers did not respond to the market as well as it could and was bought up for a song in 1993 by Wo Kee Hong Holdings, which closed the UK manufacturing arm and put its name to practically anything with a plug across Asian markets.

In reality, Rogers had a less than rosy life prior to its purchase in 1993. The company had been in administration in 1975, and became the trading name of a company called Swisstone (which was, admittedly, run by Rogers employees, using a staff of six ex-Rogers engineers). Meanwhile, Wo Kee Hong retained the UK manufacturing arm from 1993-98, and only closed the UK arm down following a sharp downturn in what were then called the Tiger Economies.

The same ‘all is lost’ wailing occurred when Gold Peak Industries purchased KEF and Celestion; it happened when Audiolab, Quad, and Wharfedale (among others) were bought by the International Audio Group, and it happened when Audio Research Corporation became part of Fine Sounds. It will happen each and every time one company buys another.

Sometimes the ‘all is lost’ moan is justified. But this only pans out in the fullness of time. It’s impossible for pundits to say at the announcement of a business partnership or transfer of ownership how that will work out one, two or ten years hence. Certainly, in looking at the structure of the investment companies involved in both financial transactions, they appear to be more concerned with investing in growing companies with ambitious plans than asset stripping and outsourcing manufacture.

When Naim and Focal joined forces, the wailing and gnashing of teeth was heard around the UK audio world. The conclusion drawn by the chattering classes was that Naim would be nothing more than a shell brand within months, and anyone still in the Salisbury factory would be speaking French. Nothing has changed, and nothing has changed… except both Focal and Naim are selling more products. The same happened when Fine Sounds bought Audio Research. The company is still making products out of its Minnesota factory, and many of us think the extra capital Fine Sounds brought to the table gave direct rise to outstanding products like the Reference 75.

And finally, there is another positive spin to all this. Despite rumours to the contrary, some parts of audio are in rude health. This proves it. Independent investors, venture capitalists, and private equity firms might play a numbers game and they might get it wrong from time to time, but they are not in the habit of betting on three-legged nags. If companies like Fine Sounds and the newly created Vervent Audio Group are worthy of investor capital, then good audio is not on its knees, after all.

* Like any Londoner, I live within five miles of six soccer stadiums, which we call ‘football’ stadiums. Calling gridiron anything apart from ‘American Football’ in this neck of the woods is asking to run a million-strong gauntlet.