Fender Musical Instruments Corporation’s new chief financial officer views his appointment as anything but a routine private equity move to pave the way for a financial exit or IPO.
This was not a case of private equity parachuting an executive into the company to sell it or take it public, Fender chief financial officer Matt Janopaul told Dive’s chief financial officer. In fact, it’s the exact opposite scenario, he says. “It’s having a CFO in the business who is really going to think about it for the long term and who, more importantly, [knows] the story of where the company has been and what it is capable of moving forward.
In choosing 51-year-old Janopaul, the maker of iconic guitars coveted by generations of rock stars and amateur musicians is tapping into a veteran who has both deep roots in his C-suite as well as the investment bands that have held stakes in the company over the years. years, including Servco Pacific Capital. Indeed, Janopaul hired his predecessor, outgoing chief financial officer Jim Broenen, he said.
Janopaul was managing director of Servco Pacific Capital, a longtime Fender shareholder and the direct investment arm of Servco Pacific’s holding company. In 2001, while a partner at private equity firm Weston Presidio and later an investor at Fender, he began working closely with Fender’s management team. In 2005 he jumped to join Fender for a stint and held various positions including President and COO.
Berkshire Hathaway from Hawaii
Janopaul takes the financial reins at Fender as it benefits from the tailwinds of a pandemic surge in demand. At the same time, Servco’s recently increased stake gives Fender leeway to pursue longer-term growth opportunities that are often anathema to private equity ownership focused on three- to seven-year horizons, a he declared.
Servco, a sort of multigenerational family office/holding company that Janopaul dubbed “Hawaii’s Berkshire Hathaway,” also has deep ties to Fender that date back to 1985, when it was part of a small group of investors. who supported the takeover. from Fender from CBS. In 2020, he announced he increased his holdings in Finder by acquiring TPG Growth’s shares in the company, thus obtaining a majority stake. Servco has “a 100-year track record that includes managing iconic brands through committed, long-term partnerships that span generations,” Servco CEO Mark Fukunaga said in a statement at the time. .
Servco’s doubling down on Fender improves the company’s trajectory, Janopaul said. And he thinks a growing number of companies are looking to family offices as their primary investors because of the kinds of opportunities that arise when the property isn’t looking for an exit. “It’s actually asking management teams to step back and think differently,” he said.
Come a long way
Janopaul, who joins a company that once claimed Bono and U2’s The Edge as board members, loves working in the music business and being in the rare kind of company that encourages employees to tattoo their name on themselves. the arm. He has a great legacy to build on.
Founded in California in the 1940s, the company’s instruments and products have been intertwined with the history of Rock n’ Roll, from jimi hendrix playing “The Star-Spangled Banner” on a Fender Stratocaster at the Woodstock festival in 1969 to Kurt Cobain playing Fender Mustang, Jaguar and Strat guitars on his 1990s grunge hits.
Behind the star bends its instruments have made, the company’s fortunes and ownership have also taken many twists and turns, including an aborted 2012 plan to go public after the IPO market cooled following a a disappointing stock market start by Facebook Inc.. Now, with long-term investor Servco firmly in place, Fender has no plans to go public, Janopaul said.
Fender is one of many companies whose outlook has so far been brightened by the pandemic, as would-be musicians have taken advantage of more time at home during COVID-19 shutdowns to start playing music at home. them. The private company’s orders jumped 29% to $1 billion in 2021 from a year earlier, he said. Based on the 2-3x revenue multiple at which lifestyle brands trade, that’s roughly the company’s valuation at $2-3 billion, he said. “The company has come a long way,” he said, noting that it was losing money on $40 million in revenue in 1985.
Going forward, he will focus on growing the business, forecasting supply and demand to ensure production capacity can rise and fall as the pandemic subsides, and building what he calls it a “digital ecosystem”. This includes services, software, and e-learning offerings that will help keep all new players engaged. Knowing that 90% of all beginner guitarists give up on the instrument within their first year, the company wants to create touchpoints to keep the music playing.
“If you can reduce the dropout rate from 90% to 80%, you double the size of the market,” he said.