Merger 101 When Vendors Become Brand Portfolios
By Janet Pinkerton
The seismic shift taking place in the specialty A/V vendor landscape needs a soundtrack: perhaps the groans and gunfire-pops of windblown ice pressing the leeward side of a winter lake. Perhaps screeching changes of metallic gears. Perhaps the scuffling stampede of the leather-soled shoes of CE executives desperately running to keep up with their expanding business operations.
Choose your acoustic metaphor: it's all about pressure, consolidation and change.
The traditional video market, with its eroding plasma and LCD margins, is largely dormant when it comes to consolidation, but audio and A/V accessories—two chaotic but profit-margin-rich categories with scores of brands fighting for mind and market share—have been and continue to be fertile merger territory. These days, the main question about an audio or A/V specialty accessory company is not whether the company is in play, but rather is it buying or is it selling?
In this Special Report, Custom Retailer maps out specialty A/V brand groups created by mergers and acquisitions, with the aim of explaining who they are, how they go to market and what their goals are for the future.
Some of these groups remain proudly self-financed, such as Lenbrook Industries and Mitek Corp.; Harman International has strategically expanded and diversified using public funding since 1985. But private equity or venture capital has been the catalyst for much of the recent consolidation in the specialty A/V industry. Private funding, for example, has backed the growth-by-acquisition trajectories of D&M Holdings, Directed Electronics, Klipsch, Linear LLC and Legrand (owner of the OnQ and Wiremold brands).
Fund managers and their partner companies and subsidiaries have discerned the financial opportunity posed by a fragmented vendor base serving a profit-padded home entertainment market, buoyed by a post-9/11 "cocooning" phenomenon and the continuing surge in new residential construction.
For example, Linear LLC, backed by its equity-funded parent company Nortek, has expanded its business beyond security and access control to include all aspects of multi-room audio and home systems control. SEC records show that from 2003 to 2005, Nortek spent $123.65 million for the acquisitions of Elan, OSCO, SpeakerCraft, M&S Systems and Panamax alone.