Focusrite plc Acquires Martin Audio Ltd
Focusrite plc, the global music and audio products company supplying hardware and software used by professional and amateur musicians, today announces the acquisition of Martin Audio and associated companies, the designer and manufacturer of high-performance loudspeaker systems for the touring and installation markets. The total consideration to be paid is £39.2 million for the business, which has approximately £4.0 million of cash. This will be funded through a combination of existing cash resources and a new loan facility of £40 million with HSBC and Natwest. The completion of the loan facility, and hence the completion of the acquisition is dependent upon shareholder approval in a general meeting on 30 December 2019. This is a Substantial Transaction under the AIM Rules. The Board expects the acquisition to be enhancing to earnings per share in the current financial year, excluding non-underlying transaction costs, and thereafter.
Founded in 1971 and also headquartered in High Wycombe, Martin Audio, designs, manufactures and distributes premium professional sound systems across the globe. It employs some 74 people worldwide, with the vast majority based at its head office and co-located manufacturing facilities. In the year to 31 December 2018 Martin Audio's turnover was £21.7 million1, with EBITDA of £2.6 million and EBIT of £2.4 million. Net assets for Martin Audio as at 31 December 2018 were £4.1 million. In the 12 months to October 2019 (unaudited), Martin Audio's turnover was £24.4 million, with an EBITDA of £3.4 million and EBIT of £2.9 million. The deal marks an exit for LDC, the private equity arm of Lloyds Banking Group, who backed the existing management team, led by Dominic Harter, to buyout the firm from global audio specialist Loud Audio in July 2018.
This is the second substantial acquisition made by Focusrite this calendar year, following the purchase of ADAM Audio GmbH and its associated companies ("ADAM") for a total consideration of £16.2 million in July 2019. Following the acquisition of Martin Audio, the Focusrite Group will have a net debt of approximately £25 million.
Martin Audio has a product portfolio across three core markets: Concert Touring/Production, Portable Sound Systems, and Installations. The market is growing and estimated to be worth in excess of $1.85 billion globally. The business has a well-established global distribution network with relationships in place with global distributors, production companies and system integrators. It also has a well spread geographical sales mix with approximately 33% of Martin Audio's sales in the USA and Americas; 41% in EMEA; and 26% in APAC.
Martin Audio is recognised as a market leader and places great emphasis on product design and innovation to sustain and drive growth with a strong product roadmap in place. Following the transaction, it is expected that Martin Audio will continue to operate from its existing headquarters and factory in High Wycombe, under the leadership of its current management team and Managing Director, Dominic Harter.
By extending the Group's business into new products and markets, which complement its existing offerings, the acquisition is strategically aligned with the Company's previously communicated aims to grow the core customer base, expand into new markets and increase lifetime value for customers.
Tim Carroll, Chief Executive Officer, 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."
Managing Director of Martin Audio, Dominic Harter said:
"We are excited by the Transaction and what Martin Audio can achieve together with Focusrite. Focusrite is a strong brand in the industry and given the geographic proximity of both our businesses we know the team at Focusrite very well. There is a great deal we can do together and we look forward to working closely to develop the opportunities across both of our businesses."
Chairman Phil Dudderidge added:
"Martin Audio is a close neighbour to us in High Wycombe, we have known and admired the Martin Audio group for many years and their current management recognised that Focusrite was a strong strategic fit to help them achieve the next phase of their growth plan. My conviction as to the outstanding performance of the Martin MLA system was cemented at BST Hyde Park concerts in recent years, notably Tom Petty in 2017 and Eric Clapton in 2018."
For 2018, the Martin Audio performance consists of Martin Audio Limited (audited), which had turnover of £20.1 million plus Martin Audio North America (unaudited), which is supplied by Martin Audio Limited and had incremental turnover of £1.6 million. Both Martin Audio Limited and Martin Audio North America are included in this transaction.