Is this the end of Suhr????

[Metlupass2]

11 million has to be a misprint.

 

[Doughboy]

11 million has to be a misprint.

They don't make mistakes like that on those kinds of acquisition news releases.

If the gross sales is $10 million, then $11 million sounds legit.

 

[thiswaythatway]

There's plenty of other small shops to take your new order for a build, just call up Tom Anderson, Thorn, Heatley, McNaught, Melancon, etc.

 

[skoora]

Wow, I didn't see that coming. But I guess I shouldn't be surprised. John Suhr has built a company completely unique in a crowded field of boutique builders - amazing guitars AND amps AND pedals AND pickups. But JS has to think about his future, and a buyout makes sense for him.

I think the OP is right about the beginning of the end coming. The company buying Suhr describes themselves this way:

About Avalanche International Corp.

"...The Company has selected a mergers and acquisitions strategy as its primary growth driver for the foreseeable future leveraging the Wall Street and activist background of its Chairman along with the vast corporate integration and management talents of its President and CEO."

I think that translates into "We're going to do to Suhr what Peavey did to Budda."

Working for a big corporation, I never get tired of corporate speak. It's so blatantly meaningless and a horrible attempt at putting a human spin on a cold and in-human transaction. Usually resulting in people losing their jobs and product quality and customer service plummeting.

 

[John4021]

This explains it ;

Finance geeking here...

That's a very generous price JS got. 3x bottom line annual earnings (revenue is top line sales) is a typical benchmark for buyouts (except for those ridiculous internet tech deals). $11 million translates into roughly 36% net profit margin at 3x earnings for $10 million in sales. It's doubtful JS has a profit margin that high. To compare, Apple's 5 year average profit margin is 23.12%. Even if it was Apple like high (again doubtful), that would mean JS got 4.75x earnings. No wonder they sold out!


Avalanche International, Corp. (AVLP) itself is only worth $8 million market cap. So, you know this a leveraged (debt financed) deal. Leveraged buyouts don't typical go to well for the company acquired in the long run. Better hoard your guitars and amps now

I'm just geeking here. I wish them the best of luck.

 

[Anonymous]

This explains it ;

Finance geeking here...

That's a very generous price JS got. 3x bottom line annual earnings (revenue is top line sales) is a typical benchmark for buyouts (except for those ridiculous internet tech deals). $11 million translates into roughly 36% net profit margin at 3x earnings for $10 million in sales. It's doubtful JS has a profit margin that high. To compare, Apple's 5 year average profit margin is 23.12%. Even if it was Apple like high (again doubtful), that would mean JS got 4.75x earnings. No wonder they sold out!


Avalanche International, Corp. (AVLP) itself is only worth $8 million market cap. So, you know this a leveraged (debt financed) deal. Leveraged buyouts don't typical go to well for the company acquired in the long run. Better hoard your guitars and amps now

I'm just geeking here. I wish them the best of luck.

I dunno, man. We sold one software company for $102M on $2.4M trailing revenue and my last company sold for $290M on 22M trailing revenue. Granted, software companies have huge margins and manufacturing companies have razor thin margins, but usually multiples are based on trailing revenues. I hope JS and the other founder and investors are happy, but it is hard to say how generous this deal is unless you know their profit margin. If it's $1M on $11M in revenue. the investors are crazy, if it's $3M on $11M and they think they can grow revenue significantly, they got a great deal...

BTW - in that $102M deal I mentioned the buyer made back their investment in two years (3 years is considered a good investment), so not all tech deals that pay crazy multiples are stupid...

Steve

 

[lespaul6]

Interesting analysis guys... its crazy it went before Guitar Center!

 

[RockyStar]

It doesn't appear great but way too early to intelligently know exactly what is going on here forward. I am sure new info will be released soon and we can get an idea from there what is or isn't happening. Suhr is a wonderful company and I hope their amps and guitars continue in the same fashion quality and availability wise as up to now. If John and Co. did come out great on this deal then good for them. Nobody deserves it more.

 

[Stealthtastic]

They got bought out by a pink sheet that was essentially nothing but a shell for a while. He also was paid in stock, stock that is basically unsellable given the stock's low volume and low mkt cap. :/

 

[Doughboy]

This deal really makes no sense to me. They opened up the new factory a little while ago, the brand has amazing name recognition for quality & craftsmanship & they seem to be doing better than ever, or so it seems to the outsider.

Being bought out for pure cash is one thing, but being bought out partially for shares of an OTC company is down right weird, unless you're desperate to sell & have no better offers.

An OTC company could be back down to a penny in no time at all & all your shares worthless.

 

[steve_k]

Let's put it this way. Quality is not going to get better when you're bought out & the new buyer wants to get the initial investment back ASAP & continue to make a profit.

exactly

 

[messenger]

I'm guessing he'll leave (maybe not right away) and start a new company.

 

[Stealthtastic]

This deal really makes no sense to me. They opened up the new factory a little while ago, the brand has amazing name recognition for quality & craftsmanship & they seem to be doing better than ever, or so it seems to the outsider.

Being bought out for pure cash is one thing, but being bought out partially for shares of an OTC company is down right weird, unless you're desperate to sell & have no better offers.

An OTC company could be back down to a penny in no time at all & all your shares worthless.

Yeah exactly. I think a lot of people are reading the PR and misinterpreting it by thinking that Suhr now has $11M to reinvest into the business but they don't. They basically just have some worthless stock and a bit of cash.

I really do hope it works out well for John though. Who knows maybe he will do what Ken Parker does now and build ultra boutique guitars when he feels like it?

 

[Killcrop]

Every time a quality high end company is bought out, the new owner always pushes for maximum profits & thus the quality is reduced ie. Parker guitars.

I love Suhr, but this scares me.

Time to stock up.

http://www.otcmarkets.com/stock/AVLP/news?id=107574

Unfortunatley, you are right. These holding companies squeze what they can out of the purchase and sell for a profit in 5-7 years.

 

[Doughboy]

I'm guessing he'll leave (maybe not right away) and start a new company.

This is what Ken Parker did.

He sold Parker to an Asian company, they raped & ruined the name & Ken when on to start a new company to make arch tops with a big wad o' cash in his back pocket.

 

[Doughboy]

This deal really makes no sense to me. They opened up the new factory a little while ago, the brand has amazing name recognition for quality & craftsmanship & they seem to be doing better than ever, or so it seems to the outsider.

Being bought out for pure cash is one thing, but being bought out partially for shares of an OTC company is down right weird, unless you're desperate to sell & have no better offers.

An OTC company could be back down to a penny in no time at all & all your shares worthless.

Yeah exactly. I think a lot of people are reading the PR and misinterpreting it by thinking that Suhr now has $11M to reinvest into the business but they don't. They basically just have some worthless stock and a bit of cash.

I really do hope it works out well for John though. Who knows maybe he will do what Ken Parker does now and build ultra boutique guitars when he feels like it?

And you can bet those stocks have a hold on them, so he won't even be able to sell them any time soon.

He can literally watch his stock go down to 1 cent & not be allowed to sell a single share on the way down.

 

[Stealthtastic]

Yeah exactly. Kind of tempted to read the SEC filings, will probably do it later.

 

[diggitydoo]

Remarkable. I've been following Suhr guitars closely for 15 years and never thought I'd see this day. Then again I never thought I'd see Suhr making senseless $10,000+ guitars. If I were John Suhr, I would want out too. Imagine the ridiculous cost and pressure of doing business in radical, leftwing CA. It was a great run nonetheless.

 

[Metlupass2]

John's response on TGP

Hey guys
I understand everyone's concern but there is really nothing to be concerned about.
We have spent a lot of time with AVLP. They love what we do and want to help us continue on our current path of growth making great products for our customers. The last thing they want is for anything to change.

This is all good for everyone involved. On the announcement day we celebrated with our employees. I will stress that there is no change to quality, process or personnel. You all know that there is nothing more important to me than to maintain the Suhr quality, brand and reputation that we have worked so hard to build. Obviously there are details I am not able to get in to at this point, nor am I able to address every question. From the outside looking in everything stays the same. So remember, nothing changes and I'm still here!

 

[diggitydoo]

Just like Rasmus.

John's response on TGP

Hey guys
I understand everyone's concern but there is really nothing to be concerned about.
We have spent a lot of time with AVLP. They love what we do and want to help us continue on our current path of growth making great products for our customers. The last thing they want is for anything to change.

This is all good for everyone involved. On the announcement day we celebrated with our employees. I will stress that there is no change to quality, process or personnel. You all know that there is nothing more important to me than to maintain the Suhr quality, brand and reputation that we have worked so hard to build. Obviously there are details I am not able to get in to at this point, nor am I able to address every question. From the outside looking in everything stays the same. So remember, nothing changes and I'm still here!