Yeah, that would be called a "whopping lie."
Originally Posted by Prs2studio
From Create Digital Music:
"The Wall Street Journal [paywall] reports that the retailer’s largest creditor is in “advanced talks” with owner Bain Capital to take over the company. (That’s the same Bain Capital made famous by former Presidential hopeful Mitt Romney, yes.)One element in common: both companies saw aggressive growth plans curtailed at least partly by the economic crisis. Guitar Center ran into trouble shortly after acquisition by Bain in 2007, growing head-first into a slowing US retail economy. Eric Garland, a writer, consultant, and “future trend analyst,” has some harsh words for the music store on his blog on the “transformational economy”:
'I said that the debt-laden big box model was not built for the long term. I stand by my assessment. The events are playing out to make my point for me … In the mean time, you should think about the future of local retail – the kind that doesn’t end up billions in debt. It may have quite a future.'
That seems a fairly black-and-white view. The question is whether the chain’s debt problems owe to the big box model fundamentally, or to a growth plan unhinged from reality.
Here’s the situation. Guitar Center has amassed some US$1.6 billion in debt, “much of it stemming from Bain’s $2.1 billion leveraged buyout of the company in 2007,” according to the Wall Street Journal. The talks would convert that debt into ownership by the creditor.
Note the numbers there. A large portion of the debt in Guitar Center came from the original, highly-leveraged buyout. In other words, you may be able to draw more conclusions about Bain from what’s happened than you would about the music instruments industry or big box retail in general.
There could be serious implications for music manufacturers, anyway, particularly the titular guitar makers. The big box format means accumulating lots of inventory, and that inventory means revenue for makers. Guitar Center is such a market force that it could pass its own financial woes onto those makers, exacting leaner margins. Then again, it was presumably doing that already."
The word I've heard - and it may or may not be true - is that companies like Mesa don't want that risk, and pulled the plug, which is why GC no longer carries their gear.