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Wednesday, January 2, 2013

Steinway Takes Down The "For Sale" Sign

Steinway & Sons image from Bobby Owsinski's Big Picture blog
I'm not sure how many of you knew that the Steinway Musical Instruments company, maker of the famed Steinway pianos, horns (Conn, Selmer and LeBlanc) and Ludwig drums, was up for sale for the last 17 months. The company, like many others in the industry, had problems maintaining their margins and sales during the downturn in the economy and its shares had plunged 10% in the last year.

The good news is that after looking at the various offers to purchase the company, the board of directors decided that no offer provided any better value than carrying on as they have been. What the company probably will do is sell its Steinway Hall building, with it's main 2000 seat auditorium, on Manhattan's 57th street.

This is another example of a company in a small industry going public, then having a difficult time playing by Wall Street rules. The musical instrument business is contracting, and regardless how many companies you roll up (which isn't a good idea anyway in this business), it will never meet those kinds of expectations.

What investment bankers don't seem to realize is that the music business is basically one of creative entrepreneurs that play by their own rules. As a result, the business is unlike any other and doesn't fit well into the world of MBA's.

I'm personally pretty happy that the company won't be sold to another hedge fund, but I don't know that it's any better off that it was anyway.


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CaptainVictory said...

I'm not familiar with the Steinway saga, so I don't know whether they were actually trying to "go public" or just offering themselves for sale to a private fund. But I am a lawyer and an MBA. So let me say this much.

If all you want to do is leverage your investment, cash out, and move on in life, then (and only then) should you seriously consider selling out, or worse, going public.

But if you're a craftsman; if you have a deep connection with your brand and your customers; if you have a personal relationship with your employees; or if you want to stay involved in the company's affairs, you should avoid selling out as long as you have other options for raising cash and capital.

To sell out is to cede control. Worse still, to go public is to burden oneself with shelf upon shelf of financial and other regulations that Uncle Sam's bureaucrats generate by the ream every month. Either way, you're placing the financial bottom line or daily share price above any other values you used to hold dear.

I'm not saying that selling or going public are bad things -- to the contrary, I think they're great ways for people to reap the fruits of their labor and for the economy to become more efficient. But it has its consequences -- as the Steinway Board of Directors has apparently recognized.

Note: This is all my personal opinion, but it's an informed one.

Jef Knight said...

My wife's family manufactured Sohmer pianos in NYC. Their buildings are NYC landmarks now.

They made the smart move to sell the company in the mid-80s to Pratt-Reed the makers of piano actions. It was the best idea for them. Today Sohmer pianos are made by Samic.

We have some very nice pictures of her dad, Harry Sohmer and his pal Henry Steinway noshing on grilled cheeze sandwiches and scotch while yelling at the Sunday football games.



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