Every day, millions of people improve their lives with the help of hearing aids. And it is about to get even better.
Sivantos (formerly known as Siemens Audiology Solutions), has a long and rich history of audiology development, producing its first telephone receiver in Germany back in 1848. With the help of EQT, Sivantos is now pioneering new technology to revolutionize hearing.
“Sivantos’ devices do so much more than just improve hearing. You can now connect your hearing aid to your smartphone, television and even stream your music from services such as Spotify. Thus, for some hearing aid users, they’re eliminating the need for other devices such as headphones for your mobile,” says Marcus Brennecke, Partner at EQT Partners, Investment Advisor to the EQT VI Fund.
EQT, having followed the company for several years before the acquisition 2015, recognized not only its cutting-edge technology, but also the strong underlying growth trajectory in the audiology sector.
“Hearing aids are essential to the lives of millions of people, allowing them to actively participate in social life again – once you’ve had one, it’s tough to live without. The sector isn’t as exposed to macroeconomic shifts and it actually performed well during the recession. Demographic developments will also provide solid underlying growth for many years to come. In 2016 Sivantos has sold more than three million hearing aids – it makes me proud and happy to be part of a team making a significant difference to so many people’s lives every year,” says Jens Due Olsen, Chairman at Sivantos.
A high barrier of entry
With six global players accounting for over 90% of the hearing-aid market, the barriers to entry are also very high. Producing a hearing aid is extremely complex, making it difficult for new entrants. EQT saw the potential in Sivantos as an acclaimed manufacturer of top-quality products in a market with increasing demand.
However, the acquisition process was far from straight forward. Siemens, the vendor, had been adverse to the notion of handing control of Sivantos to a private equity firm.
“EQT had to demonstrate it was different, and more than just a financial buyer,” says Brennecke.
“Our industrial heritage and approach went a long way in doing just that. In addition, we partnered with the Strüngmann family, respected German entrepreneurs, to further demonstrate our commitment to the traditional values that have underpinned the company for more than a century.”
“The company was pleased to take a partner on board with a track record of creating value and a proven focus on growing the top-line,” says Ignacio Martinez, CEO of Sivantos. “Thanks to the Wallenberg family background of EQT and their co-investor, the Strüngmann family, all stakeholders knew that the audiology business would be treated with the right industrial values.”
Innovating for the future
After the partnership was announced, EQT began to implement its growth strategy for Sivantos under private ownership. As part of these actions, Sivantos’ management team was strengthened, e.g., by the appointment of a new Head of Global Sales, Head of Strategy and Head of New Channels. An additional key aspect of EQT’s strategy was digitization.
“We’ve invested heavily into R&D, which has increased by 46% in annual spend since we acquired the company. Sivantos has a longstanding history of industry-first innovations coupled with patent leadership, so we wanted to continue and even accelerate the innovation,” adds Brennecke. “We’ve recently launched the industry’s first TeleCare solution that enables direct communication via camera, chat, email or SMS between the audiologist and the hearing aid user. This allows the audiologist to make remote adjustments to the hearing aid, thus reducing the need for multiple physical fitting visits to the hearing aid shop. We believe that these functionalities to enhance end user convenience combined with our online lead generation channel, will significantly contribute to the development of the hearing aid industry over the coming years.”
“EQT has been instrumental in our success over the past two years. Through strategic investments and by leveraging EQT’s strong network of Industrial Advisors with specific hearing aid and broader healthcare expertise, we have been able to achieve remarkable growth,” says Martinez.
Since the acquisition, EQT has also initiated the creation of an online lead generation service within Sivantos by acquiring audibene, the global leader in the field. audibene has scaled significantly and now has a presence in 10 countries. In financial year 2016, audibene has grown 325% organically.
Today, Sivantos employs over 5,000 people in more than 25 geographies, serving customers in 120 countries worldwide. In financial year 2015, the company achieved annual sales and Normalized EBITDA of EUR 835 million and EUR 206 million respectively.