This week, the lead item on Hearing News Watch is a post about the ongoing saga of the sale of Siemens Audiology Solutions. It is written by my blog colleague Holly Hosford-Dunn, PhD, who published it October 24 on Hearing Economics. I thought this timely report would be of interest to Hearing News Watch readers as well.
David H. Kirkwood, Editor, Hearing News Watch
Siemens’ plan to strip off Audiology was first reported at Hearing News Watch as rumor in February and again as fact in May of this year. Various types of stripping were dissected at Hearing Economics and by its many Commentators. A few well-informed, anonymous sources offered their views. It was all very exciting, as always. when Siemens shows up at the party.
The last and best words came several weeks ago in Amyn Amlani’s guest post, where he predicted increased supplier competition driving market growth if Siemens Audiology managed to re-invent itself as its own company. That bright future may be upon us in the next few weeks.
Last Friday (October 17), three companies submitted sealed, binding bids for Siemens Audiology Solutions. One was a hearing aid manufacturer, GN Store Nord. The other two bids came from European private equity firms that you and I have probably never heard of, even though they could change our profession and industry. Those companies are Permira Partners and EQT Partners.
Both Reuters and Bloomberg consider EQT the frontrunner. As of November 1, the Siemens board was expected to accept EQT’s bid, very likely on Wednesday, November 5. The bid reportedly meets Siemens’ full asking price of € 2.5 billion, about $3.13 billion US.
EQT Partners — the Outside of a Big Onion
EQT Partners AB, a private Swedish company founded in 1994, has bought and sold over 100 companies globally (US, Europe, Asia) and currently owns 66. In US dollars, it reports $27 billion in raised capital, revenues topping $31 billion, and 12% earnings growth (EBITDA). It employs about 200 industrial advisors (over half of its total employees) to provide strategic investment/divestment direction.
The group’s strategy is to purchase or finance medium-to-large companies over much of the globe (US, Europe, Asia), and build them into leading and sustainable companies by infusions of industrial strategy. Its current portfolio of 66 companies includes four diverse companies in the US, which provide services for bulk liquid and gas storage; edible oil management; and sludge and biosolid treatments.
EQT Partners is big, but it is only a subsidiary of a much bigger player, the venerable Swedish industrial holding company Investor AB. Investor AB is a publicly traded company (INVEB:SS) founded in 1916. As of 2010, InvestorAB controlled assets exceeding $30 billion (US) with reported profits of more than $4 billion.
At the core of this giant onion, Investor AB is one of 20 companies controlled by the Wallenberg family’s Foundation Asset Management AB. The Wallenberg family dates back to the 17th century in Sweden. In every generation since then, this low-profile family has led or influenced Sweden’s banking, political, and diplomatic activities. In 1990, an estimated one-third of the country’s GDP was controlled “directly or indirectly” by the Wallenberg family.
And with that brief stab at due diligence, Hearing Economics feels safe in saying that liquidity will not be an issue if Siemens Audiology Solutions is acquired by EQT Partners.
Brave New and Bigger World Coming Up?
Confidential sources reported by Bloomberg paint this picture of current negotiations:
“A deal could be reached within the next few weeks … talks were still ongoing and could fall apart, leading Siemens to pursue an IPO.”
If EQT Partners does, indeed, do the deal in the next few weeks, then the Big 6 will be looking at changes that could catapult the industry into a Really Big 6. That speculation is based on EQT Partner’s strategic goals and track record; also on one of its most recent acquisitions.
In August 2012, Highbeam reported EQT’s purchase of UC4, “the world’s largest independent IT Process Automation software company,” which they renamed Automic. At the time, EQT partner Per Franzen commented that the acquisition goal was “to drive expansion into the rapidly growing Cloud Automation market.” At present, Automic states its vision thus:
“Automic is reimagining how organizations integrate net generation service models such as cloud, DevOps and big data.”
And what, you may ask, does this have to do with Siemens Audiology Solutions or hearing healthcare in general? Plenty, if you’re thinking ahead, as some companies are, maybe including EQT.
Current tools in the traditional hearing aid market are inadequate for predicting, innovating, and guiding future growth to reach consumers. That’s especially the case because consumer choices are changing as they weigh consumption of everything from PSAPs to Hearables to hearing aids, all available via the Internet and other alternative distribution channels in addition to traditional dispensing outlets.
Siemens Audiology Solutions may turn out to be an insider-turned-outsider that brings all the financial, technological, and strategic tools needed for technological disruption. That disruption will integrate our products and service delivery into the larger world of consumers who demand ear-level devices for any number of reasons, including improved hearing.
Or Something Else?
If EQT Partners isn’t The One, then perhaps we can look to GN Store Nord, which has a long track record of innovative and expansionary acquisitions (e.g., Jabra headsets). That could open up the Bigger World of hearing devices in other ways, which would also be fun and exciting.
If it’s Permira, then we must go back to due diligence and find out who and what Permira is.
If none of the above, then the Reuters article tells us Siemens’ original thoughts on an IPO or a spin-off to existing shareholders are still in play.