Bankruptcy Is Good For Gibson Guitars

Elvis, B.B. King, Eric Clapton, Jimmy Page, Carlos Santana, Pete Townshend, Jimi Hendrix Slash, and Dave Grohl are just a handful of the musicians who have made Gibson guitars the most popular guitars in the world. The iconic instruments are so essential to modern musicians that there was a debate on the day Gibson filed for bankruptcy over whether that was the new “day the music died.” Those people have obviously not been reading this blog, because as we have said time and time again, for many companies, bankruptcy is the beginning of a new chapter rather than the end of the story.

The Details on Gibson’s Ill-Fated Diversification

Gibson Brands Inc. was founded in 1902 by Orville Gibson as Gibson Mandolin-Guitar Mfg. Co. Ltd. in Kalamazoo, Michigan. The company started out making only mandolins, but soon branched out, and became popular with those who embraced electric instruments. It’s most famous guitar, the solid-bodied, electric Les Paul, named after the Wisconsin native who designed it, remains most of the most popular guitars of all time, and early versions of it are highly collectable.

In the 1980s, the company moved to Nashville, where it expanded its line and attempted to diversify its brand by becoming a musical lifestyle company with products including headphones, speakers, and accessories. It was this ill-fated attempt at diversification that lead to the company’s 2018 bankruptcy.

The company says that it sells over 170,000 guitars annually in more than 80 countries, but its consumer electronics business is lagging. In its bankruptcy petition, which notes that the company currently has up to $500 million in debt, the company states that it will use the Chapter 11 process to refocus its operations on its musical instruments and professional audio business, “unburdened by the challenges experienced by [the company’s] separate, primarily non-U.S., consumer electronics business.”

Same Old Story, Same Old Song And Dance

Gibson’s decision to file for Chapter 11 bankruptcy in order to reorganize and refocus is not unusual. Sophisticated businesses understand that bankruptcy exists for a reason. It is not just a way to wind down operations, it is a mechanism that can be used to re-tool a business and make it profitable again.

More businesses, and individuals, should consider taking advantage of the bankruptcy process. It is not the right option in every situation, but far more people and organizations could benefit from it than currently do.

Businesses and individuals who are facing financial difficulties, and who are questioning what their options are, should not hesitate to make an appointment with an experienced bankruptcy attorney. An attorney will be able to offer advice on what options are available, and outline how they can be used to move forward. And moving forward should be the focus. Despite the fact that many people and businesses equate bankruptcy with failure, it is more about moving forward than anything else.