Harman announced today that it will acquire Dallas-based AMX for $365 million. The news was unexpected– as unexpected as was the December 19, 2012 acquisition of Martin Lighting by Harman, the most recent instance of Harman buying a well-known technology company not–ostensibly– squarely in its core business. Is the industry has providing more fertile ground for M&A’s. Could the AV industry finally be consolidating?
Better to not read too much into one acquisition– and note that both companies involved in this one are of course under wraps as to what they can say publicly before it’s all approved by shareholders and other powers that be. But one can’t help musing about the significance of the biggest acquisition in our industry in a while.
This morning I was thinking back to some math that intrigued me for several years. One of the top AV design consultants, who will remain anonymous here but is at the top of that world, used to say (I’m paraphrasing): “…. Since the AV business doesn’t involve very many public companies, metrics and market size numbers are elusive– so the way I often size up the industry is this: take Crestron’s and AMX’s total sales numbers, and from that I can extrapolate and tell you what the entire market is.”
He was talking about the AV market that involved an independent AV design consultant in the spec’ing of gear and system design (and again, this was back when AMX and Crestron controlled their category). My words, not his: that’s about the same as taking the top 100 AV design consultants in the U.S. (they used to all be in one group under the InfoComm umbrella and meet at InfoComm in private events) and adding up all their work. That math used to get you about 50% of the entire installed AV market. (The other half was done by “design build” integrators, i.e. “installers”.) Of course, it was far from scientific, but it was useful, and if fact we could come up with some interesting numbers– all from AMX and Crestron numbers.
Of course things have changed. The high end AV control market is not completely dominated by those two companies today. One company is stronger in terms of sales than the other, but more than that has changed. Anyone reading this knows that AV system “control” now is much simpler to do– whether in the system design or in the user interface that AMX and Crestron pioneered. There are many AV control products out there, and user interface can now be an iPad. Both companies are still strong but they have had to widely broaden their number of product skews, and go farther into switching/routing territory even as the Extron’s of the world have come into the “control” space.
Remember when AMX was a public company? Late 90’s, and AMX stock was like Qualcom stock. What a ride. We all know the rest of the story. AMX was taken private, and retrenched, as Crestron proved a very nimble, tightly held firm through it all. Of course, the rising tide of a perennially growing AV market (even in the recession) kept it all humming along.
I was just rereading my coverage of Harman’s acquisition of Martin Lighting in December 2012, and it strikes me now how much Harman’s stock has increased in price in the interim. Wow. I commented at that time that “the stock of the acquiring company [Harman] doesn’t normally get a bump. HAR closed Wednesday's regular session at 43.52. The stock has been trading between $34.08 and $52.75 for the past 52 weeks.”
That was then (December 2012). This is now. HAR is at about $105 today. Harman is on a roll. And keep in mind, it’s easy to think that Harman’s main business is pro audio, and consumer audio. But few realize how much the automotive sector contributes to Harman’s success. Harman products for cars– that’s a much bigger market than pro audio or consumer audio. And no one needs to be reminded that technology for the automobile is probably the hottest tech market in the world right now. (Harman acquired iOnRoad, in 2010, a personal driving assistance app, for this market.) AMX will have some good IP and talent that can be switched over to that sector.
Also remember that every thing Harman does they do with the international markets in mind. The acquisition of Martin Lighting was a lot about Harman leveraging their massive distribution system in overseas markets to bring a new product category– theatrical lighting– into that system, not just into the crowded U.S. or northern European markets. It’s no secret that the BRIC countries in particular are top of Harman’s mind as they expand. This is true for all their brands, and it will be true for AMX. Because in today’s world, winning in the U.S. is just part of the puzzle for a publicly traded company, and it’s often easier to win elsewhere and then leverage that by circling back to the home market with new capital, new products, new expertise, new efficiencies.
For Harman, it should all result in some interesting math– no matter where they start the process of market expansion… in Dallas or Dubai or Sao Paulo.
Here is the full press release from Harman today:
HARMAN to Acquire AMX - Technology Leader in Video Switching and Enterprise Control and Automation Solutions
May 21, 2014– STAMFORD, Conn.--(BUSINESS WIRE)--Harman International Industries, Incorporated (NYSE:HAR), the premier infotainment and audio group, today announced it has signed an agreement with The Duchossois Group, Inc. and its affiliates to acquire AMX LLC for US$365 million. AMX is the leading provider of enterprise control and automation systems and audio and video switching and distributing solutions. The transaction is subject to customary closing conditions, including applicable regulatory approvals.
"HARMAN is the leader in smart connectivity. Our vision is to extend our reach beyond the car into the enterprise, where we already have a substantial audio presence,” said Dinesh C. Paliwal, Chairman, President and CEO of HARMAN. “AMX is the global technology leader in enterprise control and automation as well as audio and video switching and distribution. With the addition of AMX, HARMAN will be uniquely positioned to provide complete audio, video, lighting and automation solutions to our customers globally.”
Founded in 1982 and headquartered in Richardson, Texas, AMX’s hardware and proprietary software solutions simplify the way people interact with technology and are implemented worldwide throughout a variety of enterprises and venues such as conference rooms, hotels, classrooms, network operation / command centers, entertainment venues and broadcast facilities. AMX employs more than 600 people across its operations in 19 locations worldwide.
“Starting with the acquisition of Martin lighting last year, HARMAN has set forth a clear strategy to add visual solutions to our legacy of audio offerings" said Blake Augsburger, President, HARMAN Professional division. "AMX's strong portfolio of video distribution hardware and software is a significant step into the video domain, reinforcing HARMAN's commitment to expand our professional portfolio with industry-leading technologies and brands in adjacent and complementary markets.”
“HARMAN is a world-class company, and this transaction will provide additional opportunities to grow the AMX business,” said Robert L. Fealy, President and Chief Operating Officer, the Duchossois Group, and Chairman of AMX. “The sale to HARMAN fulfills one of our fundamental objectives, which was to position this business with a leading entity that will take AMX to an even higher level of performance and success.”
“HARMAN is a world-class company, and this transaction will provide additional opportunities to grow the AMX business,” said Robert L. Fealy, President and Chief Operating Officer, the Duchossois Group, and Chairman of AMX. “The sale to HARMAN fulfills one of our fundamental objectives, which was to position this business with a leading entity that will take AMX to an even higher level of performance and success.”
AMX will be integrated into HARMAN’s Professional division, a leading professional audio and lighting business, featuring legendary brands likeAKG®Acoustics,BSS Audio®,Crown®amplifiers,dbx®,JBL ®Professional,Lexicon®,Soundcraft®,Studer®and Martin ® lighting. HARMAN’s Professional division designs, manufactures and markets leading professional audio and lighting products for recording and broadcast, musicians, cinema, touring sound, commercial applications like airports, stadiums, hotels and concert halls. HARMAN systems are installed in world renowned entertainment and hospitality complexes, transportation centers, and cultural and academic institutions around the globe.
About HARMAN
HARMAN (www.harman.com) designs, manufactures, and markets a wide range of car infotainment, safety and audio solutions for the automotive, consumer, and professional markets. It is a recognized world leader across its customer segments with premium brands, including AKG®, Harman Kardon®, Infinity®, JBL®, Revel®, Lexicon®, and Mark Levinson®, and leading-edge connectivity, safety and audio technologies. The Company is admired by audiophiles across multiple generations and supports leading professional entertainers and the venues where they perform. HARMAN has a workforce of 15,200 people across the Americas, Europe, and Asia and reported sales of $5.1 billion for the last twelve months ended March 31, 2014. The Company's shares are traded on the New York Stock Exchange under the symbol NYSE:HAR.
About AMX
AMX hardware and software solutions simplify the implementation, maintenance, and use of technology to create effective environments. With the increasing number of technologies and operating platforms at work and home, AMX solves the complexity of managing this technology with reliable, consistent and scalable systems. Our award-winning products span control and automation, system-wide switching and audio/video signal distribution, digital signage and technology management. They are implemented worldwide in conference rooms, homes, classrooms, network operation / command centers, hotels, entertainment venues and broadcast facilities, among others. AMX is a member of the Duchossois Group of Companies. For more information, visitwww.amx.com.
Forward Looking Statements
Statements in this release that are not strictly historical, including statements regarding the proposed acquisition, the expected timetable for completing the transaction and any other statements regarding events or developments that HARMAN believes or anticipates will or may occur in the future, may be “forward-looking” statements within the meaning of the federal securities laws. There are a number of important factors that could cause actual events to differ materially from those suggested or indicated by such forward-looking statements and investors should not place undue reliance on any such forward-looking statements. These factors include, among other things: general economic conditions and conditions affecting the industry in which AMX operates; the uncertainty of regulatory approvals; the parties’ ability to satisfy the closing conditions and consummate the transactions; HARMAN’s ability to successfully integrate AMX’s operations and employees with HARMAN’s existing business; and the ability to realize anticipated growth, synergies and cost savings. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in HARMAN’s SEC filings, including the Company’s most recent Annual Report on Form 10-K. These forward-looking statements speak only as of the date of this release and the Company does not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise, except as required by law.
