Maybe you’ve heard the buzz about a major shake-up taking place at B&W. Reports out of the U.K. say that Gideon Yu, Greg Lee, David Liu and others have all stepped down from the Board of Directors. There is a link being passed around to a web page for the “Companies House,” which is a government-connected registrar of companies and corporations. The link goes to a page which indicates that several B&W executives and directors have “resigned” their positions. So just what is going on?
What I Know So Far About Changes at B&W…
Let me start out by reporting that I have been sitting on this story for weeks. Actually, I have been trying for weeks to confirm the news – and through diligent efforts to connect with sources have been able to piece together some elements of what is going on.
What has really turbocharged the buzz in the market about B&W is a report that appeared a couple of days ago in U.K. media outlet What Hi Fi, on emerging developments at Bowers and Wilkins (B&W) that appears to be largely based on the Companies House page. (You can see that page here…)
EVA Automation was Not the Ultimate Acquirer of B&W
So let’s put this into perspective. Most people thought that Gideon Yu and his EVA Automation company directly acquired B&W. But as sharp-eyed Strata-gee readers noticed when I reported on the news that the company was on the verge of launching a new line of wireless speaker products under the name ‘Formation’ – there was another entity involved.
That other entity is the Formation Group, a venture capital investment group out of South Korea whose CEO is Brian Bonwoong Koo. [Interesting aside – Koo is the grandson of the founder of LG.] Actually, depending on the version of their origin story you find, Formation Group is actually an investment fund of some $400 million, created to invest in technology “transformation” opportunities. Parent company to Formation Group is another investment company called Formation8.
Report: Formation Group Paid $252 Million for B&W
One of the Formation Group’s holdings is EVA Automation, and Gideon Yu is listed as an “advisor” on the FG website. A report out of Korea noted that Formation Group is actually the company that acquired B&W. However, various filings with Companies House do list EVA Automation as the parent company to B&W.
I have since discovered a report that Formation Group paid $252 million to acquire B&W from Joe Atkins – although I hasten to add that I have not independently confirmed that number. However, one knowledgeable source told me, “That sounds round about right.”
Elaborate ‘Cover Story’ About Purchase was False
It’s possible they chose to hide the Formation Group connection as the actual buyer to sidestep the whole venture capital story. They concocted a bogus yarn about Gideon Yu owning B&W speakers and loving them so much he bought the company. Regardless of whether elements of that story are true…that was NOT the truth of how this acquisition came to be.
In any event, this new Formation Group/EVA Automation/B&W company pushed forward in creating a line of wireless speakers – marketed under the Formation brand – and offered it for sale in April of last year. They spent a lot of money to create the line and to the marketing of it.
Formation Wireless Speakers are NOT Selling Well
However, multiple sources have told me the Formation line is not selling very well at all. Apparently, the line is buggy, doesn’t yet support all of the popular streaming services, and isn’t yet supporting voice control. I have one report that says it does not interface well with video sources…important in today’s world. Given its premium pricing, the line appears to be falling short of buyer’s expectations.
All of which suggests that the company may be in financial trouble – and setting the stage for this dramatic sequence of events we are now witnessing. So just exactly what IS happening?
What We Know
- From the ‘Companies House’ listing, and other sources, I’m being told that Gideon Yu (Executive Chairman), Greg Lee (CEO), Dave Liu (director), as well as a few others, have left the Board of Directors of B&W. There are also several reports that they have left the company as well.
- There are multiple reports that previous owner – and most likely a significant creditor – Joe Atkins has stepped back in at the company to try and turn it back around. Or, perhaps, to find another buyer…which is going to be much tougher this time around. [Calling Harman Intl? Samsung? LG?]
- Newly joining the company as an corporate officer is David Kenneth Duggins, who according to What Hi Fi is a restructuring expert.
- Sources are telling me that many of B&W’s most talented engineers, market managers, and employees have left the company.
- Company filings show that B&W had a net loss of $37 million in 2017 and a narrower net loss of $23 million in 2018. Revenues dropped more than 27% in 2018 as compared with 2017. Numbers for 2019 are not yet posted.
I have reached out multiple times to the company, and to various executives at the company for comment, but my messages were not returned in time for this publication.
See more on B&W by visiting: www.bowerswilkins.com.
This is a sad tale told many time before. As events proceeded at this legendary firm, it seemed all too predictable that kicking out top managers and those who held the tribal knowledge of the firm, changes in business practice, change in focus, etc would lead to trouble.
Certainly we have seen this in their financial results much of which is also reflected in poor sales in the market. While a restructuring executive is often needed in these situations, we hope knowledgeable industry insight is also needed. Someone or more who understands B&W’s value and market past the general view. To some extent, getting ahead of their skis was part of the issue, so let’s all hope they get good advice and insight and perhaps a more fully knowledgeable and committed new owner.
Thanks as always Ted.
“[Calling Harman Intl? Samsung? LG?]”
Funny, as Samsung owns Harman.
This is a sad but not surprising story. While I left the B&W Group as COO 12 years ago, I witnessed a slow decline since my departure. New management appeared to be arrogant and thought they were smarter than the great team that created the success of the Group’s brands. They also seemed to be out of step with the changes in the marketplace. New products lacked the innovative designs of the past. The Formation Series industrial design was controversial and its features sorely lacking. So, a company which had unprecedented growth, revenue and net operating income in its market segment over 12 straight years is now in trouble. This should make for a good case study for any MBA program.
Although everyone is entitled to their opinion, the facts don’t support my old friend Peter Wellikoff’s view that Bowers & Wilkins’ decline started in 2007, although there were some legitimate concerns at that time. Nor would it have started a decade later, had other significant factors not been present. Before the EVA Automation take-over and after the carnage of the Great Recession, B&W hit the highest revenue highs in the company’s history, with success across its most diversified product offerings ever (including the new 800 Series Peter had rightfully wanted back in 2007) and strong distribution spanning appropriate market verticals. The company was on a solid footing to continue growing in May of 2016 when Joe Atkins sold the business to EVA. The “arrogance” of the time frame Peter refers to most people would call over-confidence and there were dangers in that; what arrived with EVA was something far more malignant and destructive. It is a tale often told when private equity is coupled to unsupportable ambitions.
The great shame of this situation is that a lot of people who were long-term, dedicated employees, who cared deeply for the brand, were hurt. They did not deserve to be. From their perspective, the soul of the company John Bowers founded, and Joe Atkins led to a substantial, if specialized, global business, was ripped out with nothing good to show for it. It was a very special company then.
It is no surprise to me that there will be another chapter written with Bowers & Wilkins. It appears that is starting now. That said, the old company is gone and will never return. Only time will tell if the damage done to the enterprise is insurmountable, and I’m sure there is a lot to untangle, or if it can return to form. It’s a great brand still. I wouldn’t count it out.
My comments and observations are based on both North American and European feedback. The word arrogant was frequently used in numerous conversations I had with major retail accounts and automotive partners. My access to the global consolidated financials also gave me a very good insight into what was actually occurring inside the company. In spite of this, I agree with Doug; globally B&W is a great brand. The company just needs to evolve and meet the needs of the changing marketplace.
As a dealer, I will share my perspective. B&W “was” a great brand and “was” a great business partner, but that is no longer. Even after they added Best Buy, I always felt the North American group did their best to support the company I worked for. They were honest, transparent and I genuinely felt they cared about their dealers. Once the sale happened, this pretty much ended. All of the best employees left (actually I think pretty much the whole sales team and I even heard many of the UK engineers). The replacement North American sales manager had no experience in our business and was the root of most of the deception that this article uncovers. He has since been let go and replaced by another who I hear dealers are not a fan off. If you Google B&W CEO you will read about another restructuring in 2018. Clearly under this new ownership it’s not working. I suspect between the reported 250 million purchase price and the likely tens of millions more invested to bring out the new wireless products, which appear to have flaws and are expensive, that the hole is going to be extremely hard to climb out off. Not sure what happens next. I assume they try and find another buyer or investor as it looks like all the money behind EVA is done. It’s kind of a sad what’s happened. They ruined a great company.
There is more to this story. Happy to discuss.