Uli Behringer and Midas MD John Oakley talk candidly about the future. This interview was reprinted with permission from Audio Pro International www.audioprointernational.com .
What follows is an interview, held remotely, with Uli Behringer and John Oakley, while they were traveling in the Far East. In it, the two talk about Behringer's creation of the Music Group and how Oakley found the deal offered irresistible.
FOH also got an exclusive video interview with John Oakley at NAMM; it's posted at http://fohonline.com/foh-tv.
AUDIO PRO: How did you hear about the sale? Was it an approach from Bosch or did you approach them?
Uli Behringer: That is one of life's secrets I'm afraid! How this sort of deal gets started is a key commercial advantage, so why would we share this with our competitors?
I'll be happy to tell you 20 years from now, although this might happen sooner if we were to share a few bottles of good red wine; then I might spill the beans.
On face value it seems that Behringer can gain a lot more out of this purchase than Midas/KT. What qualities or assets do you think Behringer can bring to Midas/Klark Teknik? What sort of money will you be injecting into M/KT?
UB: Before I answer this question, allow me to zoom out for a moment. When you acquire a company, what do you really buy? Finished goods, raw material, some IP, a building? 20 years of experience in the business have taught me that a company is only about people, which are the only real asset.
So before you go out and acquire a company you have to truly believe whether this potential marriage will work. Does the culture fit, do people want to work together and does everyone believe in the new vision? History has demonstrated that only 10 percent of all mergers and acquisitions work out, and our industry is no exception, as there is a massive graveyard of companies. Ten percent is not a high number, and one would be very stupid to ignore the fact and become sentimental over companies and brands.
With Midas/Klark Teknik it is even more about people as they truly live for their brands.
John Oakley: During the first meeting, I was honestly quite skeptical, and I remember that Uli did not bring any corporate presentations with him and just said: "Why don't you come and visit us as I want to show you the real Behringer?"
He told me to leave my tie and suit at home (laughs)m and when I arrived in Willich, he left me alone with the people so I could freely interact. Being able to meet the people and see what's behind was a true eye-opener for me, as it has fundamentally changed my perception about Behringer. Many of the employees in Behringer have stayed up to 16 years with the company, which tells you a lot about the culture.
UB: Michael and I always said that the real test would be meeting the people in Kidderminster and see if they are truly excited about the idea to join the Music Group. We would never acquire a company if the people would do not welcome the idea and in that case we would rather gracefully bow and walk away. Anything else would make no sense.
JO: There were several potential buyers for Midas/Klark Teknik, and indeed, both Uli and Michael Deeb (CEO, Music Group) asked me many times how our people feel about this potential acquisition. I can whole-heartedly say that we have chosen the Music Group to partner with us as we feel that there is a great fit with both Uli's and Michael's vision. Also, no one else could offer us the opportunity to pursue the dreams we always had in Midas/Klark Teknik. We are extremely excited to have a real chance to bring a whole array of new products to life.
UB: Over the last few months, I had the pleasure to really get to know John and his team. All I can tell you is that these are the most amazing and passionate people I have ever met. It is a great honor for Michael and me to work with this world-class team, and we will provide them with all the resources needed to enhance their position as dominant player in the high-end audio arena.
I always had ultimate respect for the legendary Midas/Klark Teknik brands and for the people who built this incredible company. There is no doubt that Midas/Klark Teknik is the undisputed leader in terms of sound quality, reliability, innovation and cutting-edge technology, and we will make sure this will remain.
Personally, I always had a strong desire to move into the concert sound arena and I have been waiting to join forces with a market leader. This dream has come true, but to believe acquiring a brand is the end goal is a huge mistake.
We see this acquisition as a marriage, which is all about give and take. Once the honeymoon is over, the real work starts, and we will help to provide all needed resources and infrastructure to Midas/Klark Teknik to allow them to pursue the execution of their technology and products in the shortest possible time. All I can tell you is that their roadmap is mind-blowing and we can all look forward to the products that will be brought to market.
Let me quote Michael: "Midas/Klark Teknik will have full access to the group's extensive resources and advanced automated system platforms in areas such as product development and lifecycle management, supply chain, logistics, decision support and finance." Building effective and highly efficient business systems is a passion for us at the Music Group. We have invested over $25 million in building what we believe to be the most advanced system in the industry. Midas/Klark Teknik will be able to make use of this system to greatly streamline their business practices. In addition to that we have probably more buying power than anyone else in our market for the premium components required by Midas/Klark Teknik. Both Michael and I are both musicians who understand and use pro-audio equipment personally. That means we can bring a passion for the products to the management mix as well as financial muscle.
On the other hand, Midas/Klark Teknik will give the Music Group brands access to cutting-edge experience and technology Midas/Klark Teknik has developed in the past 35 years. This comes at a perfect time as Behringer is now equally heavily investing in technology to reach the next level. When it comes to audio design, sound quality and "products-that-can-never-fail" the Behringer engineers are truly excited to learn much from Midas/Klark Teknik.
JO: I seriously believe that both parties will get a great deal out of this. Uli has spent a fortune on sophisticated management systems to increase efficiency, which I would refer to as the "totally lean enterprise system," and I am blown away by it. Midas/Klark Teknik itself has been using lean manufacturing techniques for several years now with remarkably good results. Being able to leverage off Uli's approach will take us to a new level of performance in the areas of the business which no one ever sees and this will translate into more Midas and KT products in a shorter timeframe. Oh – and the extra financial investment will help, too!
Does the Music Group have any plans to expand, or significantly invest in, Midas/Klark Teknik?
UB: Yes of course. Midas/Klark Teknik has been restricted in the investments needed to achieve their ambitious product plans. This has been a particular problem in terms of recruiting extra staff, which is often faced by small operating units in large corporations.
We have already asked John to revise his 2010 business plan to include recruiting the key staff he's needed for some time. The plan is to build a center of excellence, which includes a high-tech R&D team in the U.K. We know there is a large pool of world-class engineers out there and we welcome everyone to apply. Since Midas already has plans for a full range of digital mixers, it's now the Music Group's goal to help bring these products to market as quickly as possible. We are determined to enhance the leading role of Midas/Klark Teknik which also means investing substantially in research of new technologies and user interfaces.
Do you think the Music Group's ownership of Midas/Klark Teknik can improve the brands in any way?
JO: Strangely, I would say yes, despite the fact that Midas/Klark Teknik are already at the very pinnacle of brand desirability. The really important thing is that we are part of the Music Group. We have not been "bought by Behringer" as some of the more colorful postings to Web forums would have you believe. We have chosen the Music Group.
UB: John makes a very important point. The Music Group is a corporation with two very separate operational structures.
On one side we have what you can call "common operational assets" such as sourcing, high volume manufacturing, engineering services, logistics and warehousing, information technology and infrastructure services, system development, finance, back office operations such as graphic, technical authoring, Internet and legal services etc. Those are functions which benefit from "scale and critical mass," and, by design, are provided through separate companies employing best industry practice and technology. They are wholly owned by the group and are there to provide strictly where applicable a shared services resource.
On the other side we have the brands such as Midas, Klark Teknik, Behringer and Bugera. Those are distinct and separate companies with their own identities and intrinsic critical infrastructure such as management, R&D, sales, marketing, channel distribution and even medium scale manufacturing which all goes towards making them who they are. This separation is essential as the brand values are different and the intended use of the products is in very different market segments. We believe that this kind of operational frame work provides all our brands with a competitive advantage and tremendous operational efficiencies, which would be otherwise unattainable economically within each entity.
JO: This is extremely important to us, and to grow, we need more infrastructure and resources. The funds we had originally allocated to building our own services can now be redirected to research and product development. I just came back from a tour around the world and have had a chance to see most Music Group offices and services. What Uli and Michael have built is amazing, and I have never seen such a lean and efficient enterprise. But what excited me the most is level of passion and engagement among the employees who truly enjoy what they are doing. I would say that people have no idea what's under the Behringer hood and I hope this interview will begin to dispel some myths.
Will we be seeing M/KT technology in Behringer products in the future?
UB: In specific cases there is that opportunity. An example would be the AES50 based audio networking technology pioneered by Midas/Klark Teknik, which we believe is so sophisticated that it should become a leading standard in the industry.
I also have to emphasize that there will not be a "free-for-all" transfer of technology between brands, but Behringer and other Music Group Brands will be given access to learn best practice from Midas/Klark Teknik.
JO: To reinforce that, we will not be seeing, for example, original Midas mic pre's or EQs in Behringer products. IP that is so closely related with the brands will remain with the brands, but Midas will help Behringer to further improve their designs and provide tailor-made solutions.
How will the Music Group's purchase of Midas/Klark Teknik affect the actual products made under the two brands? Will they remain unchanged, or will they, for example, be brought more in line with Behringer's value for money ethos?
UB: The brands will keep their current brand values and positioning. There will be absolutely no change in this. What would be the point of changing? Midas, Klark Teknik and Behringer are all brand leaders in their respective markets. We would be crazy to change a winning formula.
You've made the wise decision not to change distribution of Midas and KT. Is there anything you intend to change to about the operation of the brands at this stage?
UB: Midas/Klark Teknik distribution, support, marketing, product strategy and core brand values will not change. As mentioned earlier all brands will benefit from our business systems, financial strength and buying power. As with all of our brands John will leverage group resources to achieve improved efficiencies to bring more products to market quicker.
If you do intend to change anything about the overall operation of the firm, what are your reasons for making these changes and do you think they are entirely positive from a customer's point of view?
UB: I am completely blown away by the technology in the Midas XL8 and Pro 6 digital mixers and the way the R&D team developed these mixers in such an incredibly short time. We intend to expand the current R&D team to a cutting-edge "center of excellence" for digital mixing and networking technology. With value-added products, I am convinced that customers will see this as a positive step.
There is talk of the buying power that Behringer has and the potential reduction in Midas/Klark Teknik's manufacturing costs as a result. Is this an accurate observation? If so, will Midas and KT customers benefit from it? Will this affect the products?
UB: Midas/Klark Teknik will continue to use all the specialized high performance parts that they are currently using in their products with absolutely no change. Where these parts are supplied from the same vendors and used by other parts to Music Group companies, there will be obviously increased buying power and cost benefits.
But I like to strongly emphasize that rather than lowering the prices of the products, we will be using the profits to re-invest in R&D. On the long run, this will translate into a clear advantage to Midas/Klark Teknik customers and also enhance the brand equity and resale value of the products.
Would you like to add to the Midas/Klark Teknik product ranges in any way? For example, smaller format or less advanced products that bridge the gap somewhat between the current crop of products and the ‘prosumer' category of gear offered by Behringer?
UB: Since we now have products at the ultimate high end of performance and the "prosumer" level it would be natural to add "in-between" products where there is market space for them. Midas/Klark Teknik already has plans in this area and we will continue with their strategy.
Many sound engineers – particularly American engineers who are traditionally big fans of Midas – think that this marks the beginning of the end for the brand. How do you intend to prove them wrong and, in the meantime, how will you try to restore their faith in the brand?
JO: I have had a chance to speak with a large number of our loyal customers and end users and have had zero bad reaction to this acquisition.
Once I explained the advantages for Midas/Klark Teknik, they have become pretty excited at the possibilities going forward. For those that I or my team have not had chance to speak to personally, please listen to Uli's words as spelled out in this interview and join in my excitement for the future.
Do you think Behringer's purchase of the firm might change the demographic of Midas and Klark Teknik users? If so, how?
UB: Behringer is a sister company to Midas/Klark Teknik, and both are owned by the parent, the Music Group. The existing Midas product strategy will extend the demographic anyway. Access to the Music Group resources will accelerate execution and time to market. Nevertheless, Midas/Klark Teknik will expand within the parameters of their own distinct market segment.
Which company do you think will benefit more from this, Midas and KT, or Behringer?
JO: I have recently visited the Music Group's R&D and manufacturing facilities. I was amazed at the incredibly advanced world-class business and R&D management systems which they have developed and deployed. These will give Midas/Klark Teknik a whole new competitive advantage. Equally at Midas/Klark Teknik we have some world-class capabilities, which can be deployed to help the Music Group's other brands.
We've seen it many times before, when corporates buy smaller companies and promise "no change" and autonomy for the company bought. This never lasts long and the brands invariably get sucked into the corporate structure and effectively disappear as autonomous entities. Are you guaranteeing that M/KT will remain autonomous? If so, how do you think you will succeed where others have failed.
UB: I can guarantee that Midas/Klark Teknik will remain autonomous under the leadership of John Oakley and his team.
JO: I have been part of a number of substantial corporations such as Harman and Bosch in the past. But I have never seen anything like the way the Music Group is organized and managed. I am entirely confident that Midas/Klark Teknik will not only remain autonomous but will be significantly enhanced by this acquisition.
We in the press have long enjoyed one-way traffic from Behringer – the news comes through, but no further relationship is ever forthcoming. Is it that you mistrust the press? Why do you hold the press with such disdain?
UB: I believe this is a misconception. As with everything I would agree that there is room for improvement. Nevertheless I cannot agree with the sentiment of your comment.
For several years we have opened up Behringer City in China to many members of the press. This was an opportunity for those who visited to get "up close and personal" and gain a better understanding of who we really are. We welcomed the interaction and saw a great amount of gratitude from the over 100 customers and journalists who participated. We very much value interacting with the press and welcome more opportunities to do so.
We very much value interacting with the press and welcome more opportunities to do so. We are also happy to share more about ourselves as this is one of the ways we can better inform the public about who we are, what we do and perhaps get help create a balanced view and correct any misconceptions which may exist.
