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The Empire strikes… again

Jon Chapple 16 June 2015
David 'Wiggy' Wiggins

While much of the pro-audio industry collectively throws its arms up in horror as Uli Behringer’s Music Group acquires TC Group (including Tannoy, Lab.gruppen, Lake, and TC Electronic), let’s look at this from an outsider’s perspective.

A corporate buyer has acquired a smaller group, because said buyer saw an opportunity to grow its business by adding a number of brands that complement their existing portfolio in terms of technology, IP, market share and operational coverage.

It happens that the purchaser also owns and operates a vast, state-of-the-art manufacturing complex in China which already produces products for this market that are, arguably, of comparable quality to its contemporaries. Thus it seems likely that, following the model applied to previously-acquired brands, manufacturing of the new brands will be moved from their present European bases to China. This would reduce the manufactured cost significantly, adding profit potential to the owner, their sales partners and also possibly allowing greater flexibility in end-user prices whilst retaining appropriate product quality.

This is likely to have a human cost in terms of lost European manufacturing jobs but that is, sadly for those affected, hardly a new phenomenon. Many thousands of European jobs, and many more from the US and elsewhere, have already relocated to China, driven by the irresistible lure of low labour costs that, at least for the moment, cannot be approached elsewhere. It’s just a fact of economic life: very unpleasant for those ex-employees, but unavoidable.

It’s also safe to assume that when one is investing this kind of money (undisclosed at present but the TC buy is rumoured to be in the region of $120m), one would do so on the basis of not only recouping that investment in due course but with the intention of expanding one’s profits. That can only be achieved by continuing to develop, manufacture, sell and support products that are competitive, relevant to their target markets, of professional quality and which make a valid contribution to their purchasers and users. As it happens, the buyer already has an enviable track record in this regard, having at least tripled the turnover of a previous acquisition within five years by investing millions in R&D and manufacturing to massively expand the product portfolio and thus the customer base. They wouldn’t be spending millions more unless they thought they could do it again.

From a dispassionate, commercial viewpoint it’s hard to see a downside. Both corporate hegemony and Pacific Rim manufacturing are already part of the business. This is just another sign that pro-audio is growing up as it moves from a collection of cottage industries to a group of major corporates expanding by acquisition, because that’s what happens when there is enough money in an industry to fund growth. Growth is good. Growth produces new products and new opportunities. A brilliantly successful business is re-investing heavily in our industry. What’s not to like?

Dave Wiggins is a freelance marketeer and pro-audio pundit.

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