Thread: The Future of Audio Research

Isn't it premature if not morbid to have a funeral for a company that hasn't died yet?

Originally Posted by Puma Cat

IMHO, it's difficult to predict with accuracy how ARC will fare long-term give it's (fairly) recent bankruptcy. I say this not to be pessimistic, but rather, realistic. In my experience, for "niche industries" e.g. "high-end audio", it's challenging for a company to stay true to both the vision and maintain the design ethos and quality of the company once the founder and original management team "passes away" and the comany is run by...executives. Usually, the success of these types of companies is the based on passion and singular vision of the founder and their "family", and once that's lost, historically-speaking, things usually go...awry. For example, imagine what would happen to First Watt if Nelson were not around. Personally, I don't want to think of a high-end audio "world" that Nelson is not a part of, so I remain "guardedly optimistic" about the future of ARC. Please just take these comments as only my 2¢; I certainly hope they can remain as successful as they have been historically, but realistically, IMHO, they are facing some real challenges.

From an interview with Nelson Pass I saw, I think it may have been with Mike on his podcast, he mentions he hasn't been to his factory in about 2 years, he works on designs at his ranch and the company is in good hands. Still you'd have to wonder about future innovations after he is gone. I get the impression that Pass is probably a company that will continue well into the future.

Not so fast...
Actually they can drink chard all day long and get shit faced without anyone seeing....and they don't have to share....

Originally Posted by audio.bill

Here's the latest status: Will Audio Research Corp Actually Be Acquired by Acora Acoustics? - Strata-gee.com

Thanks for sharing. That was a well written article with lots of info.

Makes you wonder how with all those interested parties, no one felt it was worth more than about $1 Million.

Originally Posted by audio.bill

Here's the latest status: Will Audio Research Corp Actually Be Acquired by Acora Acoustics? - Strata-gee.com

As I said before, it’s not just the debt, it’s the liabilities.

$40,000/month in rent. SMH. I’ve been to that facility twice. It’s literally 10 times what they need. You can play football in parts of it and not hit anything.

Here’s my question: did Bill move them to that new giant facility or was it Fine Sounds group?


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Whats shocking is a mature company like ARC not owning their own facilities ..

The article answered my questions for the most part. Since Acora was the highest bid I can't imagine the deal not being approved when next step would be going to the next highest bidder.

I guess perception is everything, I was surprised that ARC was only worth the figures given in the article.

I know it says that they paid $1.1 million for the assets but that doesn't count all the money they have to put into the company to repair the image of ARC such as giving credit to all the deposits for new orders etc. If there is enough money in "deposit" accounts, as the article says, to pay back the secured debt and make a good dent in the unsecured debt - sounds like that's another million dollars give or take a few hundred thousand plus working capital of probably a couple hundred thousand. To repair their integrity they will also need to take on the liability of all of the warranties. Who knows how much money that could cost?

So in practical terms - the total purchase price is a LOT more than just the $1.1 million.

On a side note - who knows if they are behind in rent. If it's for lease as puroagave states - that might indicate that they have to move.

looks like the owner had zero clue, shouldn't take 5 years to realize you are doing it wrong. I said it before and will say it again, more to this than has been said

Originally Posted by puroagave

ARC signed a 10-yr lease in '18 with five years remaining. Its not a sub lease which tells me they are in default and the landlord is taking back the space and marketing it for lease as a direct deal.

Oh boy. So, 2018 was Fine Sounds Group.

Dumb….like a fox!

“Hey, let’s sign one of our biggest competitors to a long term lease for way more space than they need and then dump them.”


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Originally Posted by Porsche

looks like the owner had zero clue, shouldn't take 5 years to realize you are doing it wrong. I said it before and will say it again, more to this than has been said

Why do you think I dropped them? I couldn’t continue to sell ARC knowing what I knew both factually and in my heart.

This is not a reflection of their great products, Dave Gordon or any of the amazing staff. Just realities of their situation at that time which continue today.

I can sleep at night.


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Originally Posted by puroagave

thats what private equity guys do, rape and pillage then leave a mess for the next suitor. Rondi and Dan lost control of Krell to a PE that buried language in their agreement allowing the financial partners to wrestle control away from the founders. It was a classic hostile takerover.

Buried language? As in the words were hidden that no-one could see except the rapists and pillagers? You mean it was written as clear as day but they signed it anyway either not reading it (unlikely) or read it and signed anyway.

Originally Posted by puroagave

Dan and Rondi sold 40% of the company to a PE firm, and made the mistake of agreeing to a minority position on the board. In short order Dan, Rondi and his son Brett were ousted from the co. He talks about the termination language he (presumably) missed, starts at the 3:20 mark:

I don't care what he claims. Here are the facts:

He either was dumb enough to not hire a lawyer to read the contract (about as dumb a move as you can get), or had bad legal representation. Either way it's 10000% Dan's fault. No rapists in that instance. Just a desperate or dumb seller that willingly signed a contract that the buyer then followed and did as the contract said was allowed. It's not the buyers fault the seller was willing to sign.

Dan is not a victim - he's just a bad businessman. Don't blame the other guy for acting on what Dan willingly signed (unless you're claiming he was forced to sign at gunpoint). It was DAN's CHOICE to sign.

Right or wrong like him or hate him , the push back to defend Dan is understandable, he was shafted by what many audiophiles would consider an unethical outsider , fortunately Dan has more than made up for his Krell Ousting , hi-end audio is a cottage cheese industry, everybody is known , everything is personal, there is very little to no Fortune 500 mentality in these boardrooms , if so not even a weapons grade level fool would invest, its all emotional and touchie feely stuff , sadly Brent is not amongst us today to see how Dan has survived it...

Regards

Originally Posted by a.wayne

Right or wrong like him or hate him , the push back to defend Dan is understandable, he was shafted by what many audiophiles would consider an unethical outsider , fortunately Dan has more than made up for his Krell Ousting , hi-end audio is a cottage cheese industry, everybody is known , everything is personal, there is very little to no Fortune 500 mentality in these boardrooms , if so not even a weapons grade level fool would invest, its all emotional and touchie feely stuff , sadly Brent is not amongst us today to see how Dan has survived it...

Regards

I don't know Dan personally and have no feelings towards him one way or the other.

I agree with many of your points.

If things went down at Krell like that, I wonder why Rondi stayed.

Originally Posted by Mr Peabody

If things went down at Krell like that, I wonder why Rondi stayed.

At Krell Dan and Rondi were not very smart. They ran out of money. They brought in an outside investor. They retained 60% ownership but gave the investor a MAJORITY number of seats on the board (DOH!). They ran into more money issues. Boom - they were out. There was no raping as has been suggested.

I read your post and although you replied with quote you didn't read mine. No need for you to reiterate what you already said. Rondi stayed with Krell, my question was, why, if she was "out" and things were hostile take over would she stay.

Originally Posted by MichaelsMinute

At Krell Dan and Rondi were not very smart. They ran out of money. They brought in an outside investor. They retained 60% ownership but gave the investor a MAJORITY number of seats on the board (DOH!). They ran into more money issues. Boom - they were out. There was no raping as has been suggested.

Originally Posted by Mr Peabody

I read your post and although you replied with quote you didn't read mine. No need for you to reiterate what you already said. Rondi stayed with Krell, my question was, why, if she was "out" and things were hostile take over would she stay.

Hey -sorry. I did read your post. I meant to simply hit the reply button as I was adding more info I read about on the legal briefing sites about the case.

Originally Posted by puroagave

Did you read the complaint? I've seen the abstract, this is just part of it:

"STAMFORD, CONN. — Krell founders Dan and Rondi D'Agostino have filed a lawsuit here against private-equity fund KP Capital Partners and current KP-allied Krell executives to regain their management roles at the high-end audio company they founded in 1980.

In their lawsuit, the founders contend they were locked out of the company's Orange, Conn., offices about three months ago in violation of their employment agreements after trying to assert their right to fire a KP-backed executive. They also contend that KP used “fraudulent, overreaching and unconscionable tactics” in “a scheme to usurp the assets of old Krell [owned 100 percent by the D'Agostinos] at a discount, and exert complete control of new Krell, despite only purchasing a minority ownership interest.”

I actually read the FINDINGS of the Judge of the original contract they signed, what is stated and gave each party, and the facts of what happened and the financials - not just a complaint which is a one sided story telling.

Not just the complaint which is merely an unchallenged (in it's initial written form which you quoted) story telling exercise.

Rondi is documented as being president of Krell from 12/1980 to present. Dan is on record saying he was forced out by a minority owner. I know there was a divorce in there somewhere. What I can't find is why Dan was out and Rondi remained as president.

Originally Posted by audio.bill

Here's another update: Likely New Owner of Audio Research Corp Says Company to Stay in Minn - Strata-gee.com

Thanks Bill. There is a lot of good news and information in that article. More facts and less speculation compared to a lot of previous articles.

Readers Digest condensed for the lazy but I recommend reading the entire article:

"Audio Research Will Remain in Minneapolis; ‘The Company has Not Changed’

"The biggest part of Audio Research is the people that make up Audio Research. It’s not the product. It’s not the 50 years in business. It’s the people that are actually here designing, making and building this stuff. To just move this and lose that labor force? You don’t have a company anymore…you just have a name." (about 23 employees).

"The Canadian CEO noted that although some of the court filings have suggested otherwise, Acora Acoustics is NOT purchasing Audio Research. In fact, it is Cora personally, with financial partners, that is purchasing Audio Research."

"However, after I questioned him further on these unnamed partners, all Cora would say is that they were not from private equity or venture capital. He also said they were also partnered with him in Acora Acoustics."

I wonder if staying in MN means keeping the same building, that's a lot of rent if empty space is abound. The article made it sound like they were.

This is great news for ARC's customers.

All the right things are being said.

Originally Posted by Mr Peabody

I wonder if staying in MN means keeping the same building, that's a lot of rent if empty space is abound. The article made it sound like they were.

Staying in the same place does not mean the lease cost stays the same. Financial troubles are a good lever to negotiate a lower rate if the landlord wants to keep a tenant.

ARC will most likely have to negotiate a new lease. The old lease through the courts is null and void, the court could order that the new lease have the same terms as the existing lease, however the new ARC won't end up with a worse lease. Who knows what will be agreed to, not that its any of our business.

Some cool stuff in the video, informational too. I really liked seeing the vintage ARC and some of the stories, for example, I didn't know they had limited edition gold face gear, not for U.S. though.

Originally Posted by puroagave

Looks like the Judge approved the sale.

I wish the new ownership structure the best!!!!!!!!

"AR Tube Audio Corporation"

Hopefully all of the armchair "lawyers" can sit back and take a deep breath now and move onto more important things like figuring out if they have enough digital dingleberries in their signal chain.

I thought that was the reviewers job? LOL

Just kidding . . . . . .

I saw an article that said now the name will be AR Tube Corp.

so, will all the folks of people in suit be made whole again?

From what I read about the court hearing. No. Secured creditors will be paid whole and non-secured creditors will receive some percentage of what they were owed. It does not say how much.

This of course does not prevent the new corporation to pay some of them outside of the court system.

Originally Posted by puroagave

An ARC dealer told me he was named as a creditor but isn't owed anything. I think they just name everyone in the event they did have a claim.

Yep, that’s what you do in bankruptcy. Name everyone possible that could come after you so you’re protected. I’ve been lending in commercial real estate for 20 years and have gotten a few of those notices even though the property I financed was directly not related to the company in the BK


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I reached out to ARC on Monday to see about ordering a new remote for my Preamp.
I received a response to day and yes the remote is available but the best part is that
the email was signed by Kalvin Dahl. I can only guess that maybe he has come back to ARC with the new ownership.

If this is the case it is a very good sign. If any of you have ever dealt with Kalvin in the past, you know exactly what I mean.