McIntosh Group Acquired by Bose; Does This Deal Make Any Sense?

On Tuesday, Bose Corporation – a privately held manufacturer and marketer of a variety of predominantly audio products like headphones, speakers, soundbars and car audio – announced it has acquired McIntosh Group, a high-end manufacturer of electronics under the McIntosh brand and speakers/phono cartridges under the Sonus faber brand. Terms of the deal were not revealed and a buzz has descended around the industry as to whether this is a good thing or a bad thing.

Learn more about Bose acquiring McIntosh

So when I first heard about this deal yesterday, my thought was largely “meh.” I don’t see the synergies here, and based on the initial announcement from Bose, I am frankly a little suspicious of the motivation for this transaction.

There is a sense of parallelism in this situation. Both of these brands have long storied histories…both were once incredibly powerful brands in their respective markets…both employed unique technological philosophies…and both – at one time – had legions of devoted followers. Also, both of these companies once had incredibly devoted and disciplined founders who created marketing/branding/positioning dictums their teams followed religiously.

Looking Fondly in the Rearview Mirror

Oh…and there’s one other way the histories of these companies echo each other – both of them find their best days behind them.

Chalk it up to the gathering clouds, such as the passing of the founders…leading to the drift away from the original mission…enabled by a regularly rotating carousel of management teams…each with their own opinions on goals and strategies. Add to this – especially in the case of McIntosh – ongoing cycles of ownership changes as it gets kicked down the road like a rusty can between a rotating series of different private equity company owners…all seeking to squeeze more from it for an outsized return. This process rarely includes added investment to build the brand for the long haul. More likely, new PE owners of brands try to squeeze more out of less from the company, to earn greater returns today. Then they’ll sell it later to an unsuspecting new potential owner dazzled by the formerly great brand name.

Looking Outside the Company for New Growth

I strongly suspect that Bose is hoping for a Hail Mary here. Why do I say that? Because the language they use in their official announcement contains thinly veiled references to a simple strategy. “From earbuds and Bluetooth speakers to the most luxurious systems possible for the home and on the road, Bose and McIntosh Group will now offer consumers a breadth of products and experiences for every listening occasion.”

I call that the “soup to nuts” strategy…rarely as compelling as it sounds.

I can see it now – McIntosh earbuds featuring Bose noise-canceling technology. Or how about a high-end soundbar with Sonus faber speakers, McIntosh amplification, and Bose-enhanced surround modes? I hope you can discern that my thoughts here are infused with a healthy dose of sarcasm, but I’ve seen this kind of thinking many times over.

Another Time, Another Private Equity Company Looking for an Easy Win

For example, I saw it when a private equity company acquired Thiel Audio, anxious to launch a line of Bluetooth speakers carrying the Thiel Audio nameplate – eventually changed to Aurora. It didn’t work and last I heard, there was a warehouse full of unsold Aurora Bluetooth speakers.

Over the last six decades we’ve delivered the best premium audio experiences possible; now, with McIntosh Group in our portfolio, we can unlock even more ways to bring music to life in the home, on-the-go and in the car,” said Lila Snyder, CEO of Bose Corporation. “We look forward to honouring the heritage of these brands, investing in their future and pushing the boundaries of audio innovation to bring customers experiences they’ve never heard before.”

Lila Snyder, Bose Corporation CEO since 2020

Opening Up New Opportunities

Now I don’t know if this is Bose’s plan or not, but it is clear that the company intends to drive new markets with new products based on this new business combination.

The combined forces of Bose and McIntosh Group also opens new opportunities in the automotive sector. By leveraging Bose’s 40-plus years of experience in automotive audio, and McIntosh Group’s legacy of performance and design, the brands will work together to expand their research and continue to engineer authentic in-car experiences that redefine automotive sound.

From company release: Bose Corporation Acquires McIntosh Group

Gaining access to their expertise as a pioneer in automotive audio will also help us accelerate our presence and enable us to deliver solutions that are commensurate with our reputation and performance standards.

Daniel Pidgeon, McIntosh Group CEO

Bose Premium Solutions

I have noticed that Bose tends to consider itself a manufacturer of “premium solutions” as if to suggest that this is a meeting of high-end equals. True denizens of the high-end/high-performance segment scoff at the concept that Bose is in any sense of the word a high-end or premium brand.

And while McIntosh still addresses the high-end market, even it is a shadow of its former self. But at least they retain a greater sense of what it takes to market to the high-end electronics segment.

The purchase of the two audio workshops provides Bose access into the high-end luxury audio market.

Lila Snyder, Bose CEO to CNBC

Can McIntosh Help Bose’s Automotive Electronics Biz Hit the Accelerator?

It really appears that Bose is hoping the McIntosh can help its automotive electronics business hit the accelerator. As one source in a position to know told me, “Harman is kicking [Bose’s] ass in automotive electronics.”

In fact, Harman’s successful automotive infotainment systems business is the reason that Samsung acquired the company back in 2016 for $8 billion. The company offers a portfolio of high profile brands to a variety of car manufacturers. This appears to be an effort by Bose to be more competitive by expanding its brand offerings to manufacturers.

McIntosh Once Acquired by Clarion for Its Car Audio Biz

Clarion acquired McIntosh – all the way back in 1990 (I wrote about this here)- specifically for the purpose of launching a McIntosh line of mobile electronics. When that didn’t work out, in 2003 Clarion sold McIntosh off to D&M Holdings who at that time was owned by private equity company Ripplewood Holdings. Then, in 2008, Ripplewood Holdings sold off D&M Holdings – including McIntosh – to Bain Capital.

Then in 2012, Bain Capital sold off McIntosh to Fine Sounds SpA- holding on to the rest of D&M. Fine Sounds, an Italian distributor, worked with an Italian private equity company called Quadrivio as a partner to the transaction.

In fact, McIntosh was recently successful in getting a system placed in the new Jeep Grand Wagoneer, a high-end SUV designed to compete with the Lincoln Navigator, Cadillac Escalade, and Chevrolet Suburban. And Sonus faber has some of their speakers in certain Lamborghini models.

Pressure is Building at Bose as Revenues Continue to Decline

Some commentary on social media about this acquisition have hopefully suggested that a large parent company like Bose can fund a greater research and development effort at McIntosh to help them continue to innovate. But what many don’t know is that Bose’s revenues have been steadily declining since 2020.

According to data from Forbes that I put into the chart above, the company’s revenues have dropped by $1 billion or 25% from 2020 to 2023. Generally, companies suffering through that level of decline don’t find themselves investing more in anything, even R&D. Sources are telling me that company has gone through several rounds of layoffs. Forbes lists the current employment level as 6,000, but I’m not sure that’s a current figure. Financial news network CNBC says the company employes 3,000 people.

McIntosh-Branded Headphones are a Possibility

At the end of the day, it comes down to just what Bose plans to do with McIntosh. The CEO seems open to consider just about anything, with CNBC noting, “Snyder did not rule out the possibility of Bose producing McIntosh-branded headphones or other products.”

We do think there’s a real opportunity around wearables in the luxury and high-performance space as well, which is something that we would expect you to see from us down the road.

Snyder to CNBC

Since the company has no experience in the high-end audio market, I looked to the CEO’s background to see if there are any clues as to her sensitivity to the unique requirements of the high-end specialty channel. Unfortunately, it doesn’t look as though she has any personal insights to bring to the plan. Prior to joining Bose as CEO in 2020, Snyder held executive positions at Pitney Bowes, an office products company. And prior to that, she was a partner at business consultants McKinsey & Company for 15 years.

Acquisitions Like This Can Be a Long Shot

I wish them good luck, but I’m not optimistic about the ultimate results of this partnership. Studies have shown over the years that between 8 to 9 out of every 10 acquisitions fail to increase shareholder value. Even in the best of circumstances, success is a long shot. I’m not sure that Bose/McIntosh is a “best of circumstances” scenario.

Learn more about Bose by visiting bose.com.

See more on what the McIntosh Group offers at mcintoshgroup.com.