Siemens Audiology was big and she was old. Not usually a winning combination for a princess but it works great in an oligopoly. Controlling a quarter of the global hearing aid market is an attention-getter. Belonging to an exclusive group like the Big 6 also turns heads. Totally dominating an entire G8 country is pretty awesome.
And there’s the money and the mystery. The smell of old money from an ancient dynastic family like Siemens AG is not something you can buy on eBay. As the daughter of a giant parent, Siemens Audiology, referred to as SAS by those in the know, exercised lady-like discretion over her finances, a special attribute not available to her closest rivals in the Big 6.
Old is Good
Experience comes with age and SAS had more of both than any of her sister companies. At the time of sale, Siemens issued a 3-page press release{{1}}[[1]]Siemens to sell hearing aid business to EQT and Strüngmann family, November 6, 2014, Reference number: PR2014110043COEN.[[1]], paraphrased here, which emphasized the age-and-experience angle:
- Siemens has been active in the audiology business for more than 100 years.
- Siemens launched first industrially produced hearing instrument in 1913.
- Siemens presented the first behind-the-ear hearing aid, the first in-the-ear device, the first digital hearing system, and the first wireless technology that synchronized hearing aids in both ears.
Big Is Better
Of all those attributes, Her Bigness was the biggest. Harking back to the failed 2006 Phonak-GN Resound merger, the importance of Bigness was made explicit by both players in a Hearing Review report of the deal, quoted and paraphrased here (italics added for emphasis):
GN Resound: “…the need for critical mass in the [hearing] industry is constantly intensifying because the demand for more frequent and faster product launches in all price categories is constantly increasing, necessitating ever-greater investments in development, marketing, and sales.”
Phonak/Sonova: Key benefits include the creation of a large, global hearing instrument company … broadest and deepest R&D capabilities
The Bigness dream has not diminished since 2006. GN Store Nord was back in the ring in November’s bidding for SAS. It was a bold move and it would have been a good match. The resulting company would have been BIG and whittled the Big 6 down to 5.
Not all dreams have fairy tale endings. SAS surveyed her suitors and gave her hand to EQT, which was bigger, richer, and more worldly than GN. When it lost out to the deeper pockets of EQT, GN issued a short but sad eulogy to the wires:
GN Store Nord has decided to drop a significant M&A opportunity that had the potential to transform GN.
Save the Maiden
The damsel in distress angle also made SAS special. The rate of her decline in global market share was not slowing. In a Hearing News post this summer, one senior research analyst framed Siemens as “most at risk” of the Big 6, predicting a faster rate of decline in market share for the company in coming years.
It’s not easy keeping up appearances when you’re getting close to the edge and SAS may have been feeling a bit teetery{{1}}[[1]]Yes, teetery is a word according to Scrabble.[[1]] As a princess, she also was well versed in the classic literary tradition of heroes coming to the rescue of distressed maidens.
In the age-old tradition of fairy tales, it is no surprise that in the real-life version, rich and exciting EQT and its dashing friends rescued SAS in world-class fashion. According to the financial wires, the buyout totaled 2.15 billion euros, backed by 50% equity and 50% debt in the form of loans and bonds denominated in euros and US dollar, financed by Deutsche Bank, Goldman Sachs and UBS.
Heroes Fit for a Princess
In its own press release, EQT admitted that it was attracted to the whole hearing aid industry and had followed SAS for many years. It was especially fond of SAS’s strong track record and heritage, seeing princess SAS’s growth potential to “go to the next level” and become a Queen. With EQT’s support, SAS is expected to grow bigger than ever.
This is a modern fairy tale, so it comes as no surprise that the divorce is being planned even as the pre-nup is being written. Once SAS reaches Queen-size, the marriage will dissolve amicably, according to Marcus Brennecke, EQT’s partner for German operations:
EQT’s goal is to position the hearing-aid business for an eventual initial public offering … it’s an acquisition for growth, not a cost-cutting effort.
Fig 1. The dashing Struengmann twins.
EQT was not alone in its love of SAS. When Siemens gave her hand to EQT, she got EQT’s wealthy friends, Tom and Andreas Struengmann in the bargain.
The Struengmann twins rank #446 and #527, respectively, on Forbes list of the world’s billionaires. The twins made their money in pharmaceuticals and now operate Santo Holding, which invests in German bio-tech companies, among other things. They are shown in Fig 1, though I do not know which is which.
And the Nomination for Best Hero Goes To….
QT and the Struengmanns bought SAS, but that doesn’t tell us who’s going to run it. There aren’t too many people out there with the requisite skills who also have experience in the hearing aid industry. Most of them are already running companies or going to work for Hearable startups.
The last post in the fairy tale series will finish by fantasizing about what bright and handsome hero may emerge from EQT to lead Siemens Audiology Solutions back to the forefront of our industry. And the final fantasy is what that could mean to the rest of us.
image courtesy of brainy quote
