Fender hitting the right note under TPG, Servco control

Customers, for the first time, will be able to order and buy guitars at the Fender website beginning in late November, according to William McGlashan, the founder and managing partner of TPG Growth. This includes “custom-configurable” guitars, like the famed Telecaster and Stratocaster that can be made to a user’s unique specifications. Such orders will likely take about two to three months for delivery.

“That’s the current operating plan. It could be much faster than that,” McGlashan said.

Currently, consumers who try to buy a guitar off Fender.com are directed to online dealers, such as Amazon or Sam Ash, or local dealers.

The change, which may seem insignificant, reveals what is going on at Fender. The company has inspired a passionate following from the best of Rock ‘n’ Roll, including Eric Clapton and Jeff Beck, but has made little attempt to figure out who its customers are. That’s changing, McGlashan said.

Fender now informs consumers of product updates or developments, McGlashan said. The company has also built a community channel on the Fender website that features videos from artists such as Bruno Mars, the Smashing Pumpkins or Avril Lavigne, who use its instruments. (Lavigne has her own guitar, the Avril Lavigne Telecaster.)

Fender.com provides a forum for users to ask questions or raise issues. There’s even a Fender University which offers free online lessons from the Berklee College of Music.

“We want to build the Fender brand and business to match its potential,” McGlashan said. “The company is known for its exceptional instruments and equipment, but we have high aspirations for what the Fender brand can be, engaging music fans on many more levels and points of contact.”

Based in Scottsdale, Ariz., Fender’s history dates back to the last century. Leo Fender, a radio repairman, is credited as the first to successfully design and market a solid-body guitar when he introduced the Broadcaster—later renamed the Telecaster—in 1948. Fender introduced the Stratocaster, which has been used by Jeff Beck and Stevie Ray Vaughan, in 1954. In 1965 Fender sold the company to CBS for $13 million. CBS sold the business in 1985 to then president William Schultz, and a group of employees.

Fender planned to go public last year but pulled the offering at the last moment. At the time, Weston Presidio owned about 43% of the music company. Servco Pacific, led by chairman and CEO Mark Fukunaga, agreed to buy Weston Presidio’s stake in the fall of 2012, McGlashan and  Fukunaga said.

Honolulu-based Servco, which owns automotive distributors and dealerships as well as a portfolio of PE investments, has been an investor in Fender since 1985. The firm, at that time, took part in the deal to buy Fender from CBS. Last year, Servco chose to boost its stake because it felt more could be done with Fender, Fukunaga said.

”There are opportunities as a lifestyle brand that we haven’t fully realized,” he said.

Servco conducted a “soft bake off” for a partner and picked TPG because of its experience in growing consumer brands like J.Crew.

“[TPG] took a brand that was an online catalog company and turned it into a great global retailer,” Fukunaga said.

TPG, in turn, brought in Creative Artists Agency, McGlashan said. In December, TPG and Servco completed the deal to take control of Fender. TPG and Servco pumped more equity into Fender via a refinancing in the first quarter, McGlashan said. Both Fukunaga and McGlashan declined to disclose how much they invested.

Together, Servco and TPG own a majority of Fender.

“We own equal stakes and more than 50% between the two of us,” McGlashan said.

McGlashan and Fukunaga, who are co-chairmen of the Fender board, are more fans than musicians. Both own Fender guitars. Fukunaga said he has about 10, including a Stratocaster and a Telecaster. McGlashan owns a Telecaster and a Guild acoustic, while his son has a Squier.

“Play? No,” McGlashan said. “Do I hack around? Do I make the commitment that everyone makes to play guitar? Yes.”

“I’ve been learning to play for 20 years,” Fukunaga added. “It would be presumption to say I’m a player.”

Luisa Beltran is a senior reporter for peHUB