CASE ANALYSIS

STEINWAY AND SONS : buying a legend

COMPANY BACKGROUND

For 140 years, Steinway & Sons has been recognized as a leader in the market for high-qualitygrand pianos. Established in New York City in 1853 by Henry Engelhard Steinway, a Germanimmigrant, the firm quickly prospered because of its technical excellence.

STEINWAY ARTISTS

Timeline of Steinway & Sons

After 120-years of family control, it was decided that Steinway could no longer survive as a closely-held family operation. THE OWNERSHIP OF THE COMPANY WAS SPREAD AMONG MANY FAMILY MEMBERS UNWILLING TO INVEST IN CAPITAL leading up to the sale of Steinway in 1972 , REASONS BEING PRIMARILY FINANCIAL

Steinway & Sons :1853-1972

The CBS Years :1972 - 1985Company was sold to the CBS Musical Instruments Divisionin 1972 for about $21 million in CBS stock.CBS’s management of Steinway came to a close in 1985. In November 1984, despite beingmoderately profitable, CBS announced plans to sell its Musical Instruments companies and to focusits efforts on broadcasting

The Birmingham Years : 1985 - 1995

Company was sold to the Birmingham Brothers in 1985 for about $50 million.Birmingham's did something that Steinway & Sons had resisted throughout its history. They introduced a mid-priced piano The Boston Piano

Finally, in late-1994, the Birmingham's decided to sell the company.

The company was again sold on April 18, 1995 to Dana Messina and Kyle .Kirkland,

Messina & Kirkland : April 18, 1995

On April 18, 1995, the Selmer Company agreed to purchase Steinway & Sons for $101.5 million . At the time of the purchase, Selmer was the leading manufacturer of band and orchestral instruments in the United States.

Selmer financial information prior to acquisition by steinway

Following the purchase of Steinway & Sons, Kirkland and Messina formed Steinway Musical

Instruments, Inc., with Steinway & Sons and Selmer as wholly-owned subsidiaries. Within this

newly formed company, Kirkland was named Chairman of the Board and Messina was named

Chief Executive Officer.

HOW JUSTIFIED WAS THE DECISION OF

PURCHASING STEINWAY FOR

$100 MILLION

PROBLEMS FACED

NO EXTANT SYNERGY BETWEEN STEINWAY AND SONS AND SELMER COMPANY

PROBLEMS FACED

The company has changed hands several times and product quality has been a problem. Dealers and workers were losing faith in Steinway & Sons.

PROBLEMS FACED

There are a few piano manufacturers that are Steinway’s potential competitor Competition •Yamaha •Baldwin •Kawai •Faziloi

PROBLEMS FACED

The piano industry saw a down turn in current years with global sales falling by 40 %

PROBLEMS FACED

STEINWAY’S RECENT INTRODUCTION OF BOSTON PIANOS WAS A QUESTIONABLE STRATEGY

FUTURE PROSPECTS AND EXCITING POSSIBILITIES

STEINWAY WAS A PRE EMINENT BRAND NAME IN THE MUSIC INDUSTRY AS THE PRODUCER OF THE FINEST PIANOS

FUTURE PROSPECTS AND EXCITING POSSIBILITIES

STEINWAY WAS THE LEADING PRODUCER OF GRAND AND VERTICAL PIANO

FUTURE PROSPECTS AND EXCITING POSSIBILITIES

ECONOMIC CONDITIONS WERE IMPROVING IN US AND EUROPE

FUTURE PROSPECTS AND EXCITING POSSIBILITIES

STEINWAY HAD YET TO TAKE THE ADVANTAGE OF THE GROWING ASIAN MARKET

FUTURE PROSPECTS AND EXCITING POSSIBILITIES

STEINWAY WAS THE LEADING PRODUCER OF GRAND AND VERTICAL PIANO

FUTURE PROSPECTS AND EXCITING POSSIBILITIES

INCREASE IN SALES OF VERTICAL PIANO – BOSTON PIANOS

Role of Messina & Kirkland

As both Messina and Kirkland lack experience in the piano industry, they should hire a professional team from the piano industry and they itself have gain lot of experience from financial sector from salmon so they handle financial activities.  

These slides were created by MAULSHRI PATHAK, as part of an internship done under the guidance of Prof. Sameer Mathur (www.IIMInternship.com