What will Gibson buy

[Garry Sharp]

Gibson has just raised $53m from a private equity firm to fund an acquisition - don't know if they have a specific company in mind to buy, but they must have done it for a reason.

Fender already has backing from a private equity firm as well as being part owned by Roland.

 

[lpdeluxe]

But they must have done it for a reason...

10. They are going into market research to learn why 3% of electric guitar players don't own Les Pauls.
9. Gibson is planning a study to figure out "what the hell Fender knows about basses that we don't." Ditto amplifiers.
8. They are laying in a supply of finer sandpaper so they can "return to the glossy finishes of the '70's."
7. Top management is getting demoralized with all the comments about crappy Gibson quality so they are giving themselves enormous bonuses.
6. They anticipate getting into a bidding war with Microsoft over Mister Mike.
5. Gibson is contemplating an endorsement deal to place SG posters on US Army tanks stationed in the Mid-East.
4. Failing in their efforts to suppress Paul Reed Smith, they are buying his entire inventory for the next year.
3. They are investing in time-machine hardware, so someone can go back in the previous century and try to figure out when all the fuss about Gibson started.
2. They are retooling to go into the next big thing: MIDI tambourines.
1. They will attempt to resurrect Orville Gibson.

 

[Garry Sharp]

Yup, you've covered the bases there. My money's on #2

 

[hixmix]

They're gearing up for when cowbell becomes the next big thing.

 

[timboZ]

This

http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=7347177495&rd=1&sspagename=STRK:MEWA:IT&rd=1

 

[Ed Dixon]

What would PRS cost, if it were for sale?

Ed

 

[boomtap]

I bet it is a tech company of some sort. I think they want into the fastest growing music business market. -digital-

 

[Harlequin Man]

dont they have the eathernet guitar?

maybe sokmething going into that..

anyone else see that before, or ever played one?

 

[Bassman Brad]

Hmm. Marshall, perhaps? Might as well sell people the proper amp to plug that brand new Les Paul into.

 

[Outlaws]

Hmm. Marshall, perhaps? Might as well sell people the proper amp to plug that brand new Les Paul into.

Damn right.

 

[Farview]

Hmm. Marshall, perhaps? Might as well sell people the proper amp to plug that brand new Les Paul into.

Marshall is already owned by korg which also owns roland and vox and etc...

 

[Bassman Brad]

O.K. Here's another couple of ideas.

If I were Gibson, and I wanted to buy another company that made guitars, I'd go downmarket. I'll bet Fender is cleaning Gibson's clock at all price points, but especially in the lower end. A new MIM standard strat costs, what, $199? Gibson can't sell even an Epiphone-branded SG or Les Paul for that kind of money. So, they're losing out on all the young kids who are just starting out. You want to establish brand loyalty as early as possible. (I know that they have those "Les Paul Jr. starter packs," but I bet they're not big sellers.) More than anything else, I think that Gibson needs to find a way to compete in this low end market. We can rule out Yamaha, since it's part of a huge entertainment conglomerate that also makes things like motorcycles and snowmobiles. Peavey is an extremely diverse company that probably sells TONS of stuff. In fact, I wouldn't be surprised if Peavey is larger that Gibson. Probably too big to aquire. Gibson might take a look at a company such as Ibanez. Ibanez would give them a well-known brand name that can compete in the entry-level market. In fact, it would simultaneously give them a series of inexpensive instruments in a variety of categories - electric guitars, acoustic guitars, and basses. Gibson could then have instruments positioned at all three price points - low end (Ibanez or whatever), mid-range (Epiphone) and high end (Gibson), to compete head to head with Fender's three series: Squire, MIM & MIA Fenders.

Another approach for them to consider would be to buy Line 6. This would give them expertise in modeling technology for both amps and guitars. They could also offer Variax-type features on Epiphone and Gibson guitars. Remember that Fender already has access to this technology, through their affiliation with Roland. Fender, therefore, wouldn't HAVE to buy another company. They already have the resources to develop Variax-type guitars and Pod-like amp simulators in-house.

Good question, Garry! It's certainly something very interesting to consider.

 

[CGibson]

Gibson tried to buy the Samick Co. about two years ago.
This pissed off the entire industry. This would have meant Gibson would be responsible for the making of more than 50% of the guitars in the world.
Not sure if I want Gibson in charge of that much of the guitar market.

 

[lpdeluxe]

Not sure if I want Gibson in charge of that much of the guitar market.

Yeah: you'd think they'd try to get Gibsons right, first.

Full disclosure: I own a Gibson Les Paul.

 

[Garry Sharp]

The point about private equity backed companies is that they have to give their backers an exit. At some point Roland will have to buy out Western Presidio's stake in Fender or the whole shooting match will be sold or IPO'd. Likewise American Capital Strategies' stake in Gibson (their name kind of gives it away, don't you think?)

I would place a bet that some hot shot deal doer has got a spreadsheet that shows the combined Fender and Gibson financial reports. We've seen so many big name mergers - this one has to be on the cards. Roland buying Gibson would wrap it up nicely

 

[ibanezrocks]

I own a gibson, and an Ibanez, but I sure as hell don't want gibson to own ibanez. Ibanez has consistent quality in all price ranges, where gibson even has problems on some high end stuff. They also make completely different guitars, and regarding what Bassman Brad said, I'm pretty sure Ibanez is higher end than epiphone is. It just wouldn't make sense, with the already blurring line between the expensive epiphones and the cheap gibsons to put another name between those from the same company.

The market has nothing to do with Gibsons problems, they have tons of loyalty and they're only ruining their name by making guitars in the beginner price range, what their biggest problem is with almost everything they make is consistent quality control. I've seen guitars that simply shouldnt have been sold at any price from them.

That being said, theres no guarantee they'll do something smart, so I wouldn't be surprised if they went and bought out another guitar company. I wonder if ESP would interest them.

 

[Garry Sharp]

I think they are most likely to do something that takes them into a related but growing market. Contrary to what I thought earlier, the new funding terms leaves the current owners with 100% of the equity, it's a pure debt deal, so I was wrong about an exit imperative. Line 6 is a very interesting thought - who owns Line 6?

 

[Light]

Hey, someone has to pay for Henry’s crack habit. I hear he does a truly heroic amount of coke, and that his counter looks like an apothecary.

But then, I probably shouldn't be saying that.


Light

"Cowards can never be moral."
M.K. Gandhi

 

[Light]

On a more serious note, and for what it is worth, I would bet it has something to do with lower end market share. This has been the whole issue with Gibson for the last few years, and particularly this last year as they piss on all of their (now mostly former) dealers. They have been placing absolutely unreasonable demands on many of their dealers (hence the oft heard internet quote that Henry – Juszkiewicz, Gibson’s CEO - must be doing crack). I have been told, point blank, by guys at Gibson Nashville that they have decided they do not really want any dealers other than Guitar Center, and they are well on the way. If you have ever looked at the Gibson selection of Gibson's at GC, you will note that they have very few of the really high end Gibsons. They have plenty of the low to mid level stuff, but not the really high end stuff. But of course, Gibson's reputation is completely based on their really high end stuff (for good reason, I might add). But of course, they can make more money selling 10000 guitars at $500 than 2000 guitars at $2500, because the profit margins are higher.

So they want an in to the lower cost market, and this is where it gets really scary for us guys in the guitar world who love really great guitars. Gibson is about to start making a (non-Gibson, non-Epiphone branded) line of guitars for Wal-Mart. I would not be at all surprised if the money in question is related to that line.


Light

"Cowards can never be moral."
M.K. Gandhi

 

[Garry Sharp]

So they want an in to the lower cost market, and this is where it gets really scary for us guys in the guitar world who love really great guitars. Gibson is about to start making a (non-Gibson, non-Epiphone branded) line of guitars for Wal-Mart. I would not be at all surprised if the money in question is related to that line.

Interesting, and Brad's views were similar. Certainly they would expect to build more capital value by being a large volume player rather than a niche high end specialist. But I wonder if they have any natural competitive advantage in that market, if they are not using the Gibson brand. You'd expect Wal-Mart to deal directly with a Far Eastern manufacturer I'd have thought (except obviously I am wrong because they didn't!).