Nortek’s Core Brands: ‘Business As Usual’ Following Buyout

Nortek’s Core Brands’ president Joe Roberts expects strong investment by new owners Melrose Industries. Company portal now accounts for 60% of purchases. Big CEDIA plans in place.


Admitting that even to him the answer sounds a bit cliché, Core Brands president Joe Roberts says it is “business as usual” at the company when asked by CE Pro about the status of the impending new ownership of the company. Nortek was acquired by Melrose Industries on July 5 in a deal valued at $1.4 billion. The deal is set to close on August 31, just before next month's CEDIA 2016.

Melrose’s unsolicited offer was a 38 percent premium over the stock trading price.

“I have met with Melrose,” says Roberts. “Their business model is pretty straightforward. They buy businesses that are good and invest in them. Even on their website it says, ‘Buy, Invest, Sell.’ So it is very clear that there will be another transaction, whether it is five or seven years down the road.”

He emphasizes the “Invest” principle at Melrose. “They have a pretty good track record of continuing to invest [in the businesses they buy]. They paid a premium for this business and they believe there is an even bigger premium to be had where they can make a lot of money. Usually, that will come through growth, whether that means investing in channel support, marketing or R&D.”

Melrose is not a private equity company that owns 20 or 30 businesses; therefore, it is not seeking to merge the Nortek brands with other brands in its portfolio. The six segments of Nortek will be Melrose’s primary business. Roberts notes that Melrose carries less debt than other big firms, therefore the company can invest more versus putting money into bond payments to service their debt.

Elan Dealer Council Offers Feedback

Meanwhile, Roberts and Vice President of Sales Jeff Costello had just come off of a week in the field meeting with top dealers and reps for Core Brands. The meetings were held as part of the Elan Dealer Council, which has gathered for more than a year now on a periodic basis to get an update on the product roadmap from Core Brands, and more specifically Elan.

The group rates the company’s performance in a scorecard to determine how well the company is delivering on their expectations for products and software. The council, along with a strong beta group of technologist, are examples of the customer-centric approach that Roberts and his team have brought to Core Brands since it had several communication missteps years ago with integrators.

SEE RELATED: How Core Brands Turned Things Around

“One of my favorite things to do is to get out in the field and meet with our customers. The meetings went every well,” comments Roberts. “The effort we are putting into Elan is a focus for our company. That brand is growing by well into the double-digits. The effort is paying off.”

Jeff Costello, vice president of sales, says Elan dealer council members “feel good about what we are doing.”

Costello concurs. “It is something we used to do years ago [when Elan was an independent company] but it went by the wayside as Core Brands came in. The meetings have been very illuminating for us. There is a brutal honesty about how much they love your products and where you are falling short when you get a lot of your top dealers together in a room. There are no punches pulled. It is really beneficial for us. The dealers feel good about what we are doing and what we are prioritizing on.”

In particular, Roberts says integrators are ecstatic about the ability to provide clients an upgrade path using Elan controls, the simplest interface to use, the ability for technicians to easily install the product on retrofit jobs in existing homes, and earn profit.

60% of Products Bought Via Portal

Another success from Core Brands is its Dealer Portal. Costello estimates more than 60 percent of all purchases by direct CI dealers are now being made via the portal, which launched just about a year-and-a-half ago.

“The percentage is growing every quarter. It’s a straight line up, so we expect to grow even more,” notes Costello. The portal is not just for purchasing, but is loaded with detailed specifications on the products themselves and availability by warehouse. The portal, along with the bundling packages that are in place, have bolstered Core Brands’ emphasis to encourage integrators to buy across all the brands, not just Elan, but SpeakerCraft, Gefen, Panamax, Niles, Proficient and others.

“The portal makes it so easy for them to buy across all the brands. We are not where we want to be yet, but we have certainly see improvement from where it was one year ago. Everybody seems to love it,” says Costello. The portal gives the Core Brands team a window to see purchasing patterns and speak with integrators about why they are buying some brands and not buying other particular brands.

Roberts is quick to note that dealers are not mandated to buy via the portal. They can buy through field reps, who he notes are “the best in the business.”

“We are finding that the reps are using the portal frequently looking for product information and specifications,” he adds.

Future Network Hardware Plans?

With the recent Control4 purchase of Pakedge and Legrand picking up Luxul, you might think Core Brands has designs on getting into network hardware, but Roberts wouldn’t speculate.

“We definitely recognize the importance of the network in the infrastructure of every job. In terms of hardware, dealers have a lot of choices. We believe the biggest differentiator is how products interact with that network, not the network hardware itself. We continue to expand BlueBOLT so our products can integrate more with other products. You will continue to see expansion but there is nothing we can announce right now.”

CEDIA Booth Promises Lots of ‘Wow'

At CEDIA 2016, the booth will have “a different look,” says director of marketing Bill Hensley who wouldn’t reveal any details. But he notes that the theme of the booth will be how Core Brands is making it easy for dealers to do business with the company.  Core Brands will be showcasing all the brands together in a single booth. The headline product debut will be the Panamax VT4315-PRO, which is a power conditioner with 12 IP-configured outlets that can be vertically mounted in a rack, saving precious space in the rack for technicians. It was developed out of dealer feedback on the best-selling 8-outlet M4315-PRO.

The Auriel 2.0 software from Niles will also debut. Based on the Niles MRC-6430, it is one chassis, combination home theater/multiroom audio solution with six sources and six zones. The unit also has the ability to internally stream music. Via a software update, the platform now includes one-touch control, not just for music, as Auriel 2.0 can control home lighting and HVAC.  That means every Auriel previously installed in the field by integrators now has that same capability, not just the new units. There are also new keypads and touchscreens in the solution. For technicians, the entire system is configurable on a tablet to add Lutron lighting, Aprilaire thermostats and Core Brands’ own Z-Wave products.

Also at the show, SpeakerCraft will be taking pre-orders for its new AIM Series 2 with new LCRs, which will be shipping right after the show. Plus, the company will demo the Dolby Atmos-enabled height speakers it debuted last year. Other products will include an upgrade Elan Ultramatrix, a 4K HDBaseT audio/video matrix switcher, a new Signature class of speakers from Proficient, and 4K updates from Gefen.

About the Author

Jason Knott
Jason Knott:

Jason Knott is Chief Content Officer for Emerald's Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California.


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