Reply To: Native Instruments Insolvency and Updates

[LinkedMusicians]

On SoulfulKeys said

If they sell all of that off could you see NI making any kind of comeback? What is NI without Kontakt?

I agree with your sentiment. As anyone who uses this site can see, I am a huge Kontakt user and fan. I own the latest Komplete 15 Ultimate. I would estimate that 90% of my sample library purchases are for Kontakt sample libraries. So, I would LOVE if the administrator were able to find a way to keep Kontakt in the hands of NI — obviously not with the same top execs that got the company into the dire circumstances they’re now in, but the same development team for Kontakt. I’ve also had a couple of Kontakt developers privately asking me my thoughts on this. They are — rightfully — very concerned. There’s more that I cannot say that I know NI is doing.

The reality is, NI has a government-appointed insolvency administrator trying to figure out how to salvage a company that — as of 2023, had debt-to-earnings ratio of roughly 12.7 to 1.  Their annual sales in 2024 was $25 million and they owed $318 million (that’s all in USD).  In corporate finance, a ratio above 4x or 5x is typically considered high-risk; at nearly 13x, the company was heavily over-leveraged, meaning it was carrying nearly 13 times more debt than it earned in a single year.

So you have an administrator who is tasked with paying creditors and salvaging NI. Because of the enormity of the debt, I don’t think it’s realistic that NI can simply continue business as usual. If Native Instruments were forced into a total liquidation today, it would raise significantly less than its total debt of $318 million. I’m not a finance expert, I just have experience as a strategy director (my background is mostly marketing management, but I took a strategy role for a time, with a strong focus on technology and digital) and doing analysis on potential acquisitions of mostly very large companies. But there is clearly no way to raise the cash needed to pay off that level of debt even if all of NI were liquidated; that would raise significantly less than the debt owed. Creditors won’t want a total fire sale, as they realize that they will likely get more of the money owed to them back by seeing NI continue to operate. One thing is certain though: this is a very serious time for NI, its customers, and every company that works with NI. Anything could happen to Kontakt. But I seriously doubt that NI’s crown jewel would be discontinued. That’s very unlikely. Kontakt is the one asset that I feel very confident will survive. It’s an extremely successful product. So for those focused on the future of Kontakt, it’s really just a matter of where Kontakt will land, whether it will stay with NI or be sold off. As for other NI subrands, especially smaller ones, I think the future is far less certain.

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