Private Equity in Music Tech: Risks and Consequences

The Reach of Investment Firms

Private equity investors are widespread across the music production sector. They hold majority stakes or ownership in hardware brands such as Elektron and AlphaTheta, software firms including Image-Line, digital distributors like DistroKid and TuneCore, and retailers like Sweetwater and Reverb. In the case of Native Instruments, an acquisition by Francisco Partners in 2021 and accumulated debts of £250 million by 2023 preceded an insolvency before inMusic stepped in.

How Private Equity Operates

Private equity firms pool capital from investors to acquire full control or majority shares. Their sole objective is investor profit. Unlike venture capital models focused on minority stakes, these firms hold companies for an average of seven years, according to journalist Megan Greenwell. Debt is frequently borrowed under the acquired company's name, leaving the financial risk with the business and its staff.

Industry Perspectives on Independence

Girts Ozolins of Erica Synths notes that businesses turn to private equity due to cash flow issues or a lack of direction, yet often forfeit control:

„When companies attract private equity, then their best days are over. They stop genuine innovations because maybe stuff gets optimized and costs are cut. The brightest minds simply leave and start their own companies or join other companies.“

Ozolins states that Erica Synths remains independent to sustain educational projects like Bullfrog and DIY series, citing Ableton as another successful independent company. Daniel Troberg, formerly with Elektron for 20 years and now at Ashun Sound Machines, views private equity as opportunism. Bonnier Capital currently holds a majority stake in Elektron, which recently banned discussions regarding unofficial third-party modifications on its forum.

Source: Attack Magazine