A New Chapter for Gibson

Gibson officially exits bankruptcy

Gibson is one of the oldest and most iconic guitar brands. It goes back to the origins of the electric guitar and has produced revered electric guitars such as the Les Paul, the SG, the ES-335, the Explorer & the Flying V as well as bass guitars and acoustic guitars like the J45, the J50, the SJ200 & the Hummingbird. These are some of the more well-known models behind the Gibson label but the Gibson Brand also has a number of other guitar and instrument brands under the Gibson Brands. Inc umbrella such as Epiphone, Kramer, Maestro, Steinberger, and Tobias,—along with the ownership of historical brands such as Kalamazoo, Dobro, Slingerland, Valley Arts, and Baldwin (including Chickering, Hamilton, Wurlitzer).

The guitar and instrument brands alone put the Gibson Brands. Inc, as a big organisation but in the more recent years, Gibson had been expanding into the electronics industry. Gibson offered consumer audio equipment devices through its subsidiaries Gibson Innovations (Philips brand), Onkyo Corporation (Onkyo and Pioneer brands), TEAC Corporation (Teac and Esoteric brands), Cerwin Vega and Stanton, as well as professional audio equipment from KRK Systems and TEAC Corporation/TASCAM.

Gibson Brands. Inc, also owned the popular DAW Cakewalk Sonar that was luckily retrieved by Bandlab before Gibson’s demise in Feb 2018… ask.audio/cakewalk sonar acquired by bandlab

So what went wrong for Gibson in 2018?
Speculation over filling for Chapter 11 Bankruptcy protection

Since the advent of Gibson closing towards bankruptcy, there has been a lot of speculation as to why?

In interviews with the CEO Henry Juszkiewicz, it appears there was never much financially wrong with the Gibson guitar section but more that it was to do with unmeetable debts arising around certain newly acquired electronics companies namely the sizable Philips company.

Statistics of the top ranking music companies produced by the “Music Trades” show a major change in ranking and revenue for Gibson between 2014-5.

Gibson 2010 – World Rank 9 – Est 2009 Revenues $287,500,000 – 3100 Employees
Gibson 2014 – World Rank 4 – Est 2013 Revenues $735,679,000 – 3400 Employees
Gibson 2015 – World Rank 2 – Est 2014 Revenues $2,089,700,000 – 5,250 Employees (Gibson Guitars, Pro Audio, Consumer Audio)

The Gibson Brands adventurous attempts to expand in conjunction to Gibson’s newly purchased “consumer electronics” business showing a 25% drop in revenue became critical by early 2017. This may have been one of the main reasons to drive Gibson into bankruptcy.

During 2018 there has been a lot of speculation as to why Gibson filed for Chapter 11 Bankruptcy protection. Through all the banter what seems clear is even though Gibson may have been suffering in the hands of some bad management manoeuvres the guitar and instrument division though financially viable was brought down by a struggling consumer electronics division.

Court filings indicated that Gibson’s core musical instrument and pro audio businesses were financially viable unlike the struggling consumer electronics division, which operated under the Gibson Innovation banner. Gibson guitar revenues for the 12 months ended January 31, 2018 were $122 million, a 10% increase over the $110 million for the same period a year ago. The financial woes of Gibson’s consumer electronics business, which sells headphones, speakers, and a range of accessory products, became critical in early 2017. Due to a 25% drop in revenues, the company had its vendor credit lines trimmed by more than $100 million, significantly reducing its ability to secure inventory.

On May 1, 2018, Gibson Brands, Inc. (formerly Gibson Guitar Corporation) filed for Chapter 11 Bankruptcy protection.

GIBSON GUITARS officially emerged from bankruptcy October 1, after a judge approved the transfer of ownership to private equity firm KKR & Co.

The decision came after a monthslong legal battle for control of the guitar maker that pitted KKR against Blackstone, which pushed to have the company placed up for sale. The final bankruptcy settlement will increase recoveries for unsecured creditors to 10.8%, roughly twice what was offered under earlier plans. Henry Juszkiewicz and Dave Berryman, who acquired Gibson in 1986, have been removed from all management responsibilities and their stakes in the company have been zeroed out.

A new CEO has yet to be named, but Matthew Ross, the KKR director who led the buyout, and Nat Zilkha, who heads the KKR alternative credit unit, have been named to the reorganized company board of directors. Also set to join the board are Brian Kushner, a senior managing director at FTI Consulting, which has been advising Gibson in recent months, and Morgan Neff, who oversees some investments for Wilks Brothers, a large family office based in Texas. Zilkha told Bloomberg News, “I feel like I have a personal relationship with the product. This is a great American brand that sort of lost its way. It’s almost like a responsibility to try to bring it back to what it’s supposed to be.”

Prior to joining KKR, Zilkha performed and recorded with the band Red Rooster. Separately, Gibson named Kimberly Mattoon as its new chief financial officer. She joins the guitar maker after eight years with the luxury goods company Richemont, first as CFO of its Peter Millar and IWC Schaffhausen units and since last year as COO of Richemont North America. Richemont is best known for its Cartier watches and jewellery.