McIntosh bought out....again....

[Mike]

FOR IMMEDIATE RELEASE

Grange and Randall Lead Management Buyout of Fine Sounds Group in Partnership with LBO France and Yarpa


Owner Management to Fast-Track Plans for Accelerated Global Growth


New York, April 2014 --- Mauro Grange, CEO of Fine Sounds SpA, and Charlie Randall, longtime President of McIntosh Laboratory, Inc.,have announced their plans for a management buyout of Fine Sounds Group in partnership with LBO France and Yarpa. The acquisition will facilitate greater opportunities for global collaborations amongst the product development, marketing, distribution and finance teams of each of the Group’s portfolio of brands, which includes Sonus Faber, Audio Research Corporation, Wadia Digital, Sumiko and McIntosh.

Grange, Randall, LBO France and Yarpa are purchasing Fine Sounds Group from Milan-based investment firm Quadrivio, which has owned the Group since 2008.The company headquarters will subsequently relocate to New York City, with Grange serving as Group CEO and Randall serving as Group COO and President of McIntosh concurrently.

Mauro Grange, a dynamic entrepreneur,joined Fine Sounds Group in 2009 with the intention of creating the most illustrious group of brands in high-end audio. He spearheaded Fine Sounds Group’s 2012 acquisition of McIntosh– a brand synonymous with ultimate quality audio worldwide –and thereby became acquainted with McIntosh President Charlie Randall. The two forged an outstanding relationship, dedicated to building the combined company into a leader in the international luxury audio arena. In just two short years, Grange and Randall made substantial progress leveraging distribution synergies between the Group’s brands, which are some of the best in the industry.

According to Grange, “When Charlie and I met, there was instant chemistry. We both had the same vision for the future – merging Fine Sounds and McIntosh in order to create a leading group of luxury lifestyle brands.When the opportunity presented itself to buy Fine Sounds back from Quadrivio, it was a dream come true for us both. Thanks to our partnership with LBO France and Yarpa – two of Europe’s leading private equity firms – we can now fast-track our plans for accelerated global growth and a commanding presence in high-end audio.”

Charlie Randall has been an integral part of the McIntosh family since the start of his professional career in 1985, and it was his deep knowledge of the products and passion for engineering and design that afforded him the opportunity to be named President in 2001.“Having grown up at McIntosh, it has been a lifelong dream of mine to own the company,” said Randall. “When I met Mauro, I knew we were going to do great things for McIntosh and Fine Sounds – things that would create a dynamic positive change in the industry.”

“The brands under the Group umbrella are some of the most respected in the high-end audio industry,” said Yarpa CEO Roberto D’Angelo. LBO France Director Philippe Guérin added “With Mauro and Charlie at the helm, we are confident the company is going to be a great success and are thrilled to be partners in this exciting acquisition.”

 

[Mike]

I'm sure Charlie and his group will do wonderful things with the entire group of Fine Sounds companies. We wish them the best of luck.

 

[joeinid]

I hope all goes well for the company. Love their gear and hope for a long happy relationship.

 

[Toobs]

Joe
I guess we'll have to wait and see if this is a good move or not. I do like the idea of the headquarters being based in New York City.

 

[cmalak]

So I commented on this on that other forum because somebody made the following statement:

Has to be a good thing. Its two dedicated and passionate music and audio guys buying out a bunch of investment bankers who only care about the bottom line. Obviously both aspects of the business are important but i would rather own products driven by the engineers than the beancounters.

And I replied:

Well not quite. Management Buyouts (MBOs) are the equivalent of Leveraged Buyouts (LBOs) but with management on-board, meaning the management team of the firm being bought gets to roll over their equity stake into the new entity and often that stake may be goosed a little bit in the terms of the deal. What really happened here is that Quadrivio, the Italian private equity firm (very different from an investment bank) which had bought the different pieces, starting with Sonus Faber back in 2008, followed by ARC, Wadia and Sumiko, and placing the various businesses in the Fine Sounds Group, was now ready to flip their investment (i.e., sell) and the buyers are two French private equity firms, LBO France and Yara. So really the buyers are the two private equity firms and they have rolled over and probably enhanced the ownership stake of Charlie and Mauro in NewCo.

Basically all that has happened is Quadrivio has flipped its investment, presumably at a nice profit, and the new owners, LBO France/Yara/Grange/Randall will look to shepherd the company along it's next phase of development/growth and presumably in the next 4-7 years (typical holding period for a private equity firm), there will be another sale (what is termed in the private equity industry an "exit.")

For Fine Sounds, they now have new owners, with potentially deeper financial pockets supporting any growth investment capital, to continue growing this platform.

And in another thread, another person made the following comment:

Don't forget that Fine Sounds was already under LBO. This is just a secondary LBO where the management will have the majority. I don't expect this to have major impact on the companies

...which is all true except for an MBO does not necessarily mean that Mauro and Charlie have a majority stake in NewCo.

My reply to the above:

Georges...MBOs don't necessarily mean Management have majority stake, it just means Management of target company agree to continue on with the company and they can roll over their pre-existing ownership stake in newco. Often, management's ownership stake is increased in MBOs, you are right, but it does not necessarily mean they will have majority ownership over LBO France and Yara. In fact, I doubt it, given that the equity financing provided by LBO France/Yara will be leveraged probably 3:1 or 4:1 in the deal. Theirs is the risk capital so they will want to have majority ownership but the expertise resides in Mauro and Charlie so they are brought along in the deal to shepherd the investment in its next phase of growth until LBO France/Yara decide to exit (typical holding period for PE firms is 4-7 years).

This is my read of the situation. Given these are very small private companies, the press releases tend to be very low on details/facts. I could be wrong and Mauro and Charlie could have ended up with a majority stake but then I would have to believe they put up a significant amount of the equity financing that will be levered to finance newco.

 

[Steve]

There are going to be many digital innovations coming to market in the next 7 years. If capital is not wisely spent on building innovative next gen digital product "that really works" to compliment the traditional stable that gives these brands uniqueness, this stable will fade away against the globally shifting tides.

 

[KingRT10]

Thanks for the edification cmalak!