PSNEurope has crunched the numbers on Focusrite’s unprecedented acquisition of loudspeaker manufacturer Martin Audio to find out precisely what the company has gained.
The announcement that Focusrite had broken from its studio-based origins to acquire one of the fastest growing loudspeaker companies in the pro audio business will have surprised many. Predominantly a provider of tools and instruments for music makers, few could have seen such a transaction on the horizon, especially after bolstering its presence in the studio sector with the £16.2 million acquisition of revered headphone and monitoring brand ADAM Audio earlier this year.
However, a close look at figures posted on the London Stock Exchange this morning goes some way to explaining why this might just be one of the year’s shrewdest business moves.
Focusrite is said to have paid £39.2 million for Martin Audio (which has “approximately £4.0 million of cash”). So what exactly has it got for its money?
In the year to December 31 2018 Martin Audio’s turnover was £21.7 million, with EBITDA of £2.6 million and EBIT of £2.4 million. Net assets for Martin Audio as at December 31 2018 were £4.1 million.
In the 12 months to October 2019 (unaudited), Martin Audio’s turnover was £24.4 million (up 12 per cent year-on-year), with an EBITDA of £3.4 million (up 31 per cent year on year) and EBIT of £2.9 million, with the transaction marking an exit for LDC, the private equity arm of Lloyds Banking Group, which held a significant stake in Martin Audio and backed the existing management team, led by managing director Dom Harter, to buyout the firm from global audio specialist Loud Audio in July 2018. It’s worth noting that the transaction provides LDC with a money multiple return of 2.6x.
Of particular interest for Focusrite is the rate of growth Martin Audio’s key markets. The touring/install/portable sound market is estimated to be worth in excess of $1.85 billion globally, according to the London Stock Exchange. And the company has consistently been adding new distributors in burgeoning territories the world over: approximately 33 per cent of Martin Audio’s sales are currently in the USA and Americas; 41 per cent in EMEA; and 26 per cent in APAC.
Following the transaction, it is expected that Martin Audio will continue to operate from its existing headquarters and factory in High Wycombe, where the vast majority of its 74 members of staff are based.
What the key players had to say
Harter said: “LDC has been a really supportive partner. They have encouraged us to focus on our priorities and have trusted us to get on with things. Our partnership has given us the perfect platform to invest in key growth areas of the business, broaden our customer base and fundamentally improve the way we operate. Joining Focusrite means we can continue this journey and play centre stage at even more music festivals and public commercial venues across the world to cement our name as a leading high-performance loudspeaker brand.”
Tim Carroll, CEO, commented: “The acquisition of Martin Audio is a clear demonstration of our strategic aim to expand into complementary new markets. Martin Audio is an established brand with solid financials that can instantly add value to the enlarged Group. Just as importantly, the business is culturally aligned with our existing operations. They will have an important role to play as we continue to focus on our goal of enriching lives through music, by removing barriers to creativity; from that first spark of musical inspiration, to delivering an emotionally charged performance on stage. The Martin Audio team share our hunger to innovate and our passion as music and sound enthusiasts. Their close geographical proximity to Focusrite will help significantly in the development of future cross selling and marketing strategies.”
Yann Souillard, head of LDC in London, said: “This is a fantastic result for both Martin Audio and LDC that demonstrates the success of our partnership. We wish Dom and the team the best of luck on the next stage of their journey, and we have no doubt they will continue to drive the business forward.”
Philip Weston, investment director at LDC, said: “Martin Audio’s track record of success is as extensive as Pink Floyds’ back-catalogue. We’ve worked closely to help the business build its brand and extend its reach into international markets. This deal is a real credit to the continued hard work the management team have put in to grow the business as quickly as they have over the past 18 months.”