Mr Music
We look to invest in businesses where the current owners have neither the inclination nor the vision to invest in its growth and development into new markets. With EEN we worked closely with the new management team to realise new opportunities in online and mail-order retailing.
Investing in market leadership
EEN, formerly Mr Music, is Scandinavia’s largest mail-order distributor of music compilation CDs. Based in Gothenburg, the company creates its own compilations and sends them to the members of its various clubs every month.
We acquired EEN from its private owner in December 1999, together with our Swedish co-investment partner AB Segulah, committing funds to consolidate the company’s leading position in existing markets and expanding its operations.
Different from the rest
EEN’s products have a distinct advantage over albums released by its competitors. As they’re sent out monthly, customers receive their albums while the singles featured on the CDs are still in the charts. Other compilation albums are released only two to three times a year and contain tracks that are no longer current.
Mr Music had over 160,000 active members throughout Scandinavia and estimated that 70% of the region’s core 15-25 age group had at some time been members of one of its clubs. But for some time EEN’s owner had been running the company for its cashflow and was reluctant to provide capital for expansion, particularly to exploit the obvious opportunities presented by online retailing.
More than just capital
While we sourced the transaction and led the sometimes delicate negotiations, AB Segulah provided invaluable advice throughout. This included the recruitment of new management team members, investigating the commercial opportunities for the company in the Scandinavian market, and helping the vendor to create the most tax-efficient way of exiting from the business.
From the start, we provided much more than just capital. We worked closely with the management team, asking them what they wanted to do with the business and helping them formulate a business plan.
With the funds we made available for expansion, the company launched a number of clubs, including audio books and DVDs. In particular, it launched a new mail-order club called Kids University. This club offers educational games on CD Rom which teach English, Maths and History to children aged between three and 13 years. The club is targeted at over three million mothers in Sweden.
In December 2004, EEN was sold to a group of Swedish business angels achieving an IRR in excess of 30%.