New Buyer’s Strategy for Steinway& Sons:
“Cash is King”

This essay assesses the wisdom of the $100 million acquisition of Steinway by the Selmer Company given the shrinking sales of recent years and the highly-leveraged failure of the Birmingham ownership. One can justify the purchase from four perspectives: the improvement in the financial resources of the new owners, the reconsideration of the marketing strategy, targeting and positioning, the forecasted improvement in Steinway piano sales and the short and long-term corporate financial effects. Steinway & Sons should be able to prosper under the new owners in both the short term and long term based on the inherent strength of the brand as the world’s finest piano, the available financial resources and smart marketing. After four generations of family ownership the company suffered from inadequate corporate oversight under CBS and an overly leveraged balance sheet with Birmingham. CBS focused on cost control at the expense of product quality with the expected results. Birmingham knew nothing about the piano business and were so leveraged that much needed investment was impossible to sustain. Their marketing strategies were an improvement over CBS, but the high cost of capital and poor capital structure were drags on the company. They had little working capital. Average inventory of $75 million showed the huge problems in the company’s operation cycle. Inventory turnover averaged 273 days with around $100million net sales per year. During summer periods costs remained high but revenue declined. They had to spend lot time dealing with lawyers and bankers instead of focusing on sales and marketing. These financial problems prevented Birmingham from exploring and maximizing the deep inner value of the brand and company. While their financial situation was always dire, Birmingham marketing strategies