We've seen plenty of merger and acquisition activity in the live sound sector in the last several decades, but the vast majority has been of the vertical variety: larger live sound companies consuming smaller ones, or equals finding common ground, mainly with the intentions of growing market share and minimizing competition, the classic motivators for M&A activity. The acquisition of Showco by Clair Brothers in 2000 was a classic example, creating the largest sound reinforcement company in the world. A Horizontal Merger
Last month, it was announced in these pages that Cincinnati-based SR provider, Loud and Clear, Inc. had acquired Kentucky-based On Location Lighting Systems. That horizontal move had a specific purpose behind it – Loud and Clear owner Bill Deavers says On Location's specialty of corporate lighting will help position Loud and Clear for what Deavers expects will be a recovery in corporate work in the next year. But it's also a continuation of a strategy that Deavers began nearly 20 years ago when he added lighting to his SR menu, followed by staging, barricades and other services, generally by buying companies that supplied those services.
"It makes sense to be a one-stop for certain types of companies, particularly regional ones like us," he says, as he was managing a four-day load-in for Paul McCartney at Cincinnati's Great American Ballpark for an early August show. Deavers adds that there's also a parallel vertical strategy – Loud and Clear recently became the sixth U.S. supplier of L-Acoustics' K-1 array. "I think it's about growing in every direction that makes sense."
Where the vertical synergies seemed to be obvious to most players in the SR business, the horizontal ones seem less so to some. Everett Lybolt, general manager at Sound Image in Nashville, feels strongly that going horizontal can distract a company from its core competencies. "Some say they can do it all, but many times they end up falling short in some respects," he comments. "You build a reputation and a trust factor over time that people see what you do and know that you do it better than anyone else, and they want to stay with you for that reason."
Turnkey Benefits
Eric Todd, president of BML-Blackbird Theatrical Services, in Secaucus, NJ, believes that some horizontal reach is necessary. The company, formerly BML Stage Lighting, looks at audio as "a necessary evil," in that by not offering a full service menu, they leave themselves potentially vulnerable to competitors that assert that they can, as well as not being able to let themselves and the client benefit from the economies of scale that full service can bring about. Todd says that BML added audio services seven years ago and handles fixed-installed systems themselves, but subcontracts larger "one-off" and touring jobs. "We have no desire to be Clair or Sound Image, that is not our market and these companies are at the top of their game," he says. "But we service an average of 1,500 to 1,600 events per year and provide audio services on approximately 500 to 600 [of them]. Being able to offer audio as well as video [BML Video Services is a separate but wholly owned video and projection company] works for many of them," he says, adding that M&A between two complementary providers offers both companies and their clients advantages.
However, where Deavers sees M&A as a way to prepare for an economic upturn, Todd sees it as a defensive strategy for a prolonged downturn. "The economy is not great now, and won't be for a long time," he says. "So if [merging] means it takes one truck to get the lights, the sound, the staging and the video to the venue instead of four trucks, that makes sense for everyone, especially in dense markets like Manhattan and L.A."
Robin Magruder, president of Crossroads Audio in Dallas, had a front-row seat for the Clair-Showco acquisition. He had worked at Showco for 30 years and says that, while that event, in 2000, saw Clair absorb an audio-only company, Showco had actually been a turnkey services provider in the 1970s and 1980s, ultimately spawning moving-light giant Vari-Lite. "Companies had begun becoming more focused on particular disciplines as the concert touring business became more complex" in the late 1980s, he says. "In the 1970s and early 1980s, one company conceivably could do it all, and we did," including sound, staging, lighting, logistics, rudimentary video and staffing. But that became harder to sustain, and Showco began to slim down starting in 1980.
Favorable Logistics
However, Magruder says the pendulum may be swinging back again that way. Referencing how full-service provider Solotech has beefed up its sound component with the acquisition earlier this year of Audio Analysts, he says that, for certain types of projects, a turnkey approach is both desirable by the client and potentially profitable for the provider. Further accelerating it could also be the proliferation of regionally-based sound companies which, watching more artists leave on tour with less of their own equipment, and picking up sound and lights packages regionally, see the opportunity to become the local turnkey provider. Magruder cites Onstage Systems and Gemini Light Sound Video in his own Dallas market, and LD Systems in Houston and San Antonio, as examples of how full-service is working well on a regional basis. "It seems to be more prevalent lately for regional work, and it may eventually end up trending back towards national, too," he says.
Special Events Services in Greensboro, SC, is a perfect example of what happens when that trend is taken to its logical conclusion. The company began as a hyperlocal lighting provider in 1986 in the Southeast, but added audio the following year, then staging and video, via a combination of a few acquisitions and hiring specific expertise. An early supporter of Hootie & the Blowfish, the band essentially took SES national with them when they exploded as part of the jam band phenomenon in the 1990s.
Jim Brammer, president of SES, says that compelled them to quickly scale all aspects of the company up quickly, an often-trying proposition for the company's four owners, who each headed up a services division of the company. "We had to sit down at the beginning of every year and divvy up how much money each division was going to get for the year for equipment and operations," he says. "It was a firestorm sometimes."
That Quentin Tarantino approach to budgeting was finally resolved when they decided to let clients determine the equipment they expected to want in the coming year before they would research the options and then allocate departmental budgets accordingly, Brammer says. He adds that he thinks Loud and Clear's acquisition of On Location is well-timed and prudent. "It's a perfect move for the times."
