Harman International announced its purchase of lighting and video vendor Martin Professional literally a week before Christmas, as though it were gift that couldn’t wait to go under the tree for Harman Professional, for which the larger company is, apparently, a good and well-heeled parent. And like many of the complex gadgets that were opened on Christmas morning, it’ll take some time to find out how good it fits with everything else. A $146 Million Deal
Harman’s acquisition cost about $146 million, not that much for a $4 billion behemoth. But if Harman can make the integration of its new video and lighting division a smooth one with its corral of pro audio properties — AKG, Crown, JBL, Lexicon, dbx, BSS, Studer and Soundcraft — it will be able to significantly extend its presence in the still-expanding live-event, installation and broadcast markets, markets where those audio brands already have a lot of traction. It would be doing so, furthermore, at a time when the audio side of the live-sound and installed markets are seeing competition greatly heat up, with more European and Asian sound system manufacturers vying for a part of the U.S. market, and in the process putting additional pressure on prices and margins.
Martin’s lighting products are well regarded in the U.S. and their market share here is respectable, though they were a bit late to the LED table. Their U.S. sales strategy has been characterized by some observers as less-than-aggressive. And LED and other forces are also putting pressure on lighting product prices. Harman’s announcement made it clear that Martin would continue to operate as an independent business unit within the Harman Professional Division, with its existing points of sales and marketing contacts. But at some point Harman will have to begin to integrate its new sibling into the rest of the family, creating a coherent one-stop proposition for all of its markets and customers. At some basic level, there is already some synergy. As Jack Kelly, president of Group, One Ltd., which at one time distributed both audio and lighting products, pointed out to me, “From a sales point of view, ‘We call them speakers, you call them lights.’ Only the nouns change, the verbs remain the same.”
Potential Synergy
That synthesis on the sales and marketing side will also have to be paralleled to some extent on the technology side. Harman’s HiQnet audio communications and control network system shows how well Harman can organize and then leverage its assets; lighting and video are very different animals from audio, and product development is going to have to remain on its own track for some time to come, but at the control level, they’re all headed to the same IP-based domain. If Harman can get that right, and do it soon, the newly bulked-up vendor will become even more formidable.
There’s even more incentive that argues for rapid assimilation: Harman Professional is part of the huge Harman International empire, which also includes automotive, consumer audio and other lifestyle product divisions, all of which could find some value in lighting products. The Martin acquisition could be leveraged throughout the larger company just as JBL’s pro audio brand value has helped it in the consumer market.
Aside from the fact that, as a lighting and video company, Martin becomes the oranges to Harman Pro’s apples, corporate culture will be another X factor to watch. Harman’s style tends to be a combination of longish hair and button-down shirts, about the right tonal balance for an audio technology company centered largely around music but still part of a publicly traded corporation. Some of both will likely appeal to the conservative style surrounding the lighting company. Martin’s Florida U.S. base also gives Harman another geographical outpost — not a bad place to begin to acquire a taste for Akavit in the dead of winter.
Lights, Sound, Action!
The melding of lighting and audio entities is unique on the professional side, but the consolidation that the Harman/Martin deal reflects isn’t uncommon within the lighting industry itself. Philips’ acquisition of Genlyte/Vari-Lite and Barco’s purchase of High End Systems — both transactions occurred in 2008 — rearranged the landscape of pro lighting at that time. But Harman matching sound and lights comes at a time when the live-event and installed-AV integration markets are experiencing their own consolidation tremors. Large production entities like Live Nation and AEG Live have a preference for one-stop vendors that can scale to meet their multi-locational needs, and the AV business is increasingly focused around larger shops, like Clair and AVI-SPL, themselves the products of M&A activity, that would also find value in being able to source much of their production needs from a single large vendor.
Harman’s move seems like the right one at the right time. As Blake Augsburger, executive vice president and president of the Harman Professional Division, stated at the time of the announcement, “Martin product lines are an excellent complement to our professional audio business. After the transaction closes, we will be able to offer a full line-up of audio, lighting and video solutions for the live stage as well as permanent venues and installations.” Sometimes, bigger really is better.
