APRIL 2008 W4 ALERTBREAKING NEWS: D&M's Boston Acoustics Layoffs
Window Dressing for A Potential Sale...Or Efficiency Gain From Corporate Integration? D&M Responds in Exclusive ALERT Interview
<STRATECON><April 21, 2008>Sources tipped off Stratecon’s ALERT that there had been a significant layoff at Boston Acoustics last week with dozens of positions eliminated by the company. Boston Acoustics, a manufacturer of high quality loudspeakers-both automotive and home, is a division of D&M Holdings, Inc.
D&M has seen a fair amount of press recently as several news agencies – including the ALERT - have reported that RHJ International SA/NV, D&M’s principal shareholder, is in the process of auctioning off its shares with four major participants in the running. The four organizations said to be currently in a significant due diligence process have been identified as Merrill Lynch & Co., Best Buy Co., Advantage Partners LLP, and Kenwood Corp. in association with Bain Capital LLC. Reports have indicated that RHJI’s auction will be completed soon…perhaps as early as this May.
The timing of the layoffs at Boston Acoustics, a D&M company, has led some to speculate that this was a form of “window dressing” or preparing the company for a potential sale by lowering overhead to make the company appear more attractive to potential buyers. According to one ALERT source, who due to the sensitivity of the situation requested anonymity, this layoff was the most significant layoff in the company’s history…although not the first.
Gail Petersen, Director of Corporate Communications at D&M Holdings, Inc., in an exclusive interview with the ALERT, confirmed the story saying, “There were some positions eliminated at Boston Acoustics” recently. According to Petersen, thirty positions were eliminated and while she didn’t have an exact company headcount, remaining employment was said to be “well over one hundred.”
Noting that D&M has no direct role in determining RHJI’s – or any other investor’s - decisions, Petersen was clear and firm in rejecting the window dressing charge.
“Absolutely not a factor,” Petersen said when asked if D&M was in some manner attempting to prepare the company for potential new owners by cutting overhead at Boston Acoustics. While declining to confirm or deny RHJI’s auction, Petersen pointed to another explanation for the cutbacks.
According to Petersen, the Boston Acoustics layoffs are a direct result of the normal gains in efficiencies obtained as part of the acquisition process. D&M Holdings not only markets the Denon and Marantz brands under its corporate umbrella, but has also several other acquisitions including McIntosh, Boston Acoustics, Snell Acoustics, Escient…and more recently Philips Sound Solution, Calrec Audio, and Allen & Heath.
As more companies are merged, Petersen said, redundancies are eliminated and headcounts are rationalized to more efficient operational levels with a dramatic improvement in company earnings. This is a tactic that is not exclusive to D&M, but a normal management strategy as part of the acquisition process.
In the case of Boston Acoustics, Petersen suggested there was an additional factor. Last year, Boston Acoustics had a major product line rollout with an unusually large number of models introduced. This year, the company expects more modest line changes and enhancements, so there was an additional opportunity to rationalize staffing levels.
D&M, Petersen says, is continually seeking ways to improve overall corporate efficiencies and, as a result, enhance profitability at the same time.
When it was pointed out to Petersen that the Boston Acoustics acquisition was completed more than two-and-a-half years ago (August, 2005), and questioned as to why this rationalization took so long to accomplish, Petersen suggested that each situation is unique and must be evaluated independently.
In the case of Boston Acoustics, not only was the company being integrated with D&M overall, but Snell Acoustics was combined with Boston Acoustics at the same time. This added complexity to the situation requiring more planning for smooth implementation.