Murders and Acquisitions

Written by Bill Leebens

As a callow child waaay back in the early ’60’s, I became obsessed with two closely-related themes: seeing the unseen, and buried treasure. The first part may have had its roots in Superman’s X-ray vision, allied to a fascination with microscopy which was likely fueled by another comic book story, “Worlds Within Worlds“, which I saw reprinted in 1963’s Strange Tales Annual #2. In that story, a scientist developed increasingly powerful microscopic imaging which revealed that drops of water contained entire civilizations of sentient beings. Throw in Superman’s  bottled city of Kandor and  the Roger Corman potboiler, X: The  Man with the X-Ray Eyes, which also appeared in ’63—and I was warped for life. I knew that there was stuff out there, just beyond my field of view.

The fact that my mother managed antiques shows in those pre-Roadshow days meant that  I spent a lot of time in dusty junkshops and bookshops, where I learned to scan the tops of shelves for hidden treasures. I also  knew far more about the difference between cut glass and pressed glass, the various hallmarks associated with RS Prussia, and how to tell a lithograph from a reproduction—than any small child really should.  I also scrutinized pocket change for the 1909 S-VDB pennies that I knew would inevitably appear. Sadly, they did not.

Years later as  a less-callow youth in the late ’70’s and early ’80’s, I became fascinated with Kohlberg Kravis Roberts–these days known as KKR. For those who are blissfully unaware of such things, KKR was one of the first major private equity firms of the modern era, specializing in mergers and acquisitions. Put simply, they would raise funds and buy and  smoosh together companies that offered the possibility of synergy (to use a favorite bit of biz buzzspeak): y’know, “the whole is greater than the sum of the parts”. That thing.

The other part of their business was in a way just the opposite: they would buy companies they viewed as undervalued, then dismantle them and sell off the parts.  Sometimes that dismantling worked; sometimes not.

Key to all these seemingly disparate fields is the idea of vision—and not just in the ophthalmological sense. We lionize business pioneers as visionaries, implying that they can literally see that which does not yet exist: a trait which, in other circumstances, would likely land one in a detox unit. We find the term “visionary” applied to genuine world-changers like Ford, Jobs, and Gates, but also in a sadly-diminished form applied to those who just do things a little differently: “Bob was a visionary who saw that the x-14 op amp could be replaced by an IC with massive savings in parts and labor, costs.”

Yeah, no. Not every competent professional is a freaking visionary. And don’t get me started on the diminution of the word “hero”.

“So, Leebs—you’re 500 words in here, what’re you getting at? What’s this got to do with audio?”
Good question. It has everything to do with the business of audio, and nothing to do with the art and science of it.

Most audio industry veterans are fatalists. I’m a cynic, not a fatalist—probably due to stubbornness more than to any positive character trait. Here’s the thing: while we’ve heard for decades that the sky is falling, audio is a dying field, yadda yadda—it keeps going. It may not be the home entertainment leader it once was, but it keeps going. Pragmatic contrarians like Paul McGowan say,    ” the old customers may be dying off—but we keep getting new ones to take their place.”

Private equity people like the aforementioned KKR are the supposed visionaries of the finance world. They see value where others do not, and see ways to extract the value of lost causes, value  that eludes the scrutiny of  others. As mentioned in Industry News this issue (and others), those guys keep buying up assets in the audio biz.

Why do you think that is? Are they suckers? Or are we blind to the worth of our own little kingdom?

I would suggest that the latter is more likely. Rather than killing off venerable audio companies, these investors have done a great deal to nurture dozens of brands.

Yes, there have been murders amongst the acquisitions—Snell comes readily to mind—but for the most part, purchases or investments by capital groups have done a lot to stabilize the audio industry, and bring needed business savvy to many businesses which were tech-savvy but not brilliant at business. And like it or not, it doesn’t matter how technically brilliant a company is if they can’t keep their doors open. The old racing aphorism, “to finish first, one must first finish” certainly applies here.

Perhaps we need to look at our realm with fresh eyes: if you weren’t a dyed-in-the-wool audio geek, what companies would you notice? I’ll bet that will have more to do with marketing than with technical expertise. I know from decades of  sometimes-painful experience that technowizards rarely understand marketing, and are one of the few remaining groups that believe the whole “if you build a better mousetrap…” thing. Few folks are that naive these days.

So—looking at it as an objective businessperson or a disinterested consumer: what audio companies would you be inclined to support, and perhaps even invest in? Why?

I’ll be interested to read your ideas.

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