Reply To: Native Instruments Insolvency and Updates

[LinkedMusicians]

On Brian said

Good argument for Fender.  I would love to see them take in NI hardware and software, but not the other companies (Izo, etc) that were grossly over-paid for.  I suspect the seller of P.A. (to NI) is going to get it back for pennies on the dollar 🙂

I think the price any of these parts of NI will sell for is dependent on the competition for them. If there are indeed many companies discussing — and possibly — making offers, that, of course, lessens the likelihood that this will be a fire sale. That’s why the administrator’s first order of business is scrubbing the debt from the business, because it appears these are otherwise profitable sub-brands. If PA has been profitable and the debt is scrubbed, and there is competitive bidding, it could sell for a decent price.

The parties in these equations that is guaranteed to get a small fraction of what they put in are creditors.  So, they know that, and they’re just  trying to get as much as they can, knowing it will only be a small fraction of what they’re owed. But they don’t want a fire sale and there’s no need for a fire sale if there are numerous interested parties.

A fire sale would happen if these parts of NI had poor sales and were long neglected technologies, but that’s not the case. So, when you remove the debt, you have very attractive brands and business units. If the reports are true and the debt was at something like $240 million (that’s from memory — I wrote of it earlier) and the company was earning $25 million annual revenue, there’s no way those creditors are going to see anything close to what they loaned the company and no buyer would take on a company with that debt to earnings ratio. We can’t stress enough that the problem with NI wasn’t that their products aren’t competitive, the problem is all of those acquisitions made, buying companies when their prices were very high, and being saddled with massive debt due to that, especially when the market changed and interest rates increased. So, again, separate all of that debt from the picture, and you likely have an attractive business or businesses.

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