The "Jersey kid" who ran the most famous guitar brand in the world
Bill Mendello, Rutgers MBA grad and Fender CEO from 2005-2010, helped build the musical instrument icon to be ready to go public this year
Fender, there are few more recognizable name brands in the world. Rutgers MBA alumnus Bill Mendello, a self-described “Jersey kid from Paterson,” was instrumental in guiding the iconic brand over the past 30 years, his final five years as CEO (2005-2010). The Fender Stratocaster has been the guitar of choice by legends like Eric Clapton, Jeff Beck, The Edge, George Harrison and Jimmie Hendrix.
But Fender came close to being a footnote in 20th Century culture like Woolworths or Pan Am. Bought by CBS in 1965 for $13 million, Fender struggled to keep its identity in a stifling corporate culture that didn’t understand music or finicky musicians. The guitar giant suffered difficult losses in 1977-1981 at a time when CBS companies were cut loose for losing money. The upstart Japanese guitar company Yamaha was making high-quality guitars cheaper than Fender allowing it to gain market share in the United States.
Mendello had moved rapidly up the corporate ladder at CBS becoming the comptroller in the Musical Instruments Division. He and Fender president Bill Schultz were tasked with devising a plan to save the struggling company.
Schultz and Mendello rode to the top floor of CBS Inc. headquarters in New York to present a five-year-plan to rescue Fender from oblivion to the feared media tycoon and long-time CBS President William S. Paley.
Schultz and Mendello’s plan called on CBS to make significant investments in the company to improve manufacturing, reconnect to the needs of musicians, and revamp marketing, resulting in losses of $10 million a year for the first few years before the groundwork would lead to profitability.
“It was one of those meetings with about 40 or so people in the room listening to our presentation, but everyone deferred to Mr. Paley. Everyone laughed when he laughed, nodded when he nodded, waited on his every move to see how he would react,” recalled Mendello. “There are certain moments in time when the whole direction of your life is decided. I knew that the next three to four seconds were going to determine my career.” Paley made them wait for five seconds, which for Mendello felt like an hour. He liked what he saw and Fender was saved. But not for long.
Bill Mendello, Rutgers MBA '72, was CEO of Fender from 2005-2010.
Three years into the plan, Paley was no longer president of CBS and new management decided to sell off the music division. With Fender losing money, there were few buyers, and CBS was thinking of liquidating the company by selling off its best assets. Schultz and Mendello were approached to see if they wanted to initiate a leveraged buyout.
“Bill and I had never done anything like this before,” said Mendello. “So we go back and decide to put a group together to make an offer to CBS. But they kept making us raise the offer which after a few months we finally said this is our final offer. Call us by 9 o’clock or no deal.”
Again time slowed down for Mendello as the clock approached 9 on their deadline day. “Finally, five minutes to 9, the phone rang and they accepted. We had bought Fender!” But the company was highly leveraged, 13:1, $13 million borrowed, $1 million in equity, and $20 million in previous losses. “We had 12 months to turn a profit or the company was done,” said Mendello. The new Fender team managed to secure raw materials, open a new factory, move all production offshore, so that at the end of 12 months, they turned a profit over $1 million with $40 million in sales.
The 80s and 90s saw Fender gradually claw its way back in market share in the US and expand internationally, especially in Japan and Korea. Artists like Eric Clapton who had modified his guitar were impressed with Fender’s craftsmanship in replicating his sound.
“We sold it as a Fender signature model and Clapton was very supportive of that,” said Mendello. “He actually played one we built and said it was just as good which showed that we didn’t just make an imitation model. There was actually some substance and soul in it.”
The stamp of approval by the musicians helped lead Fender to become the top musical instruments company in the US. According to Fender’s IPO filing on NASDAQ.com, “Fender had the #1 market share by revenue in the United States in electric, acoustic and bass guitars and electric and bass guitar amplifiers, according to data provided by MI Sales Trak as of December 2011.” Today, Fender has $700 million in sales and is still very profitable according to Mendello. The IPO date is expected in the fall with the company looking to raise $200 million.
Rutgers MBA started the journey
Mendello’s career trajectory was forever altered by getting his MBA at Rutgers. “I started out as an engineer and thought that was my passion,” he said. “But I found that I was fascinated with finance so I decided to get a business degree.”
Being the state’s university, Rutgers offered an affordable high-quality degree in a very intimate atmosphere. Some lessons never left him. “I still use to this day, something I remember from a Rutgers MBA class, TINSTAAFL,” said Mendello with a chuckle. “There Is No Such Thing As A Free Lunch or TINSTAAFL as the professor called it.”
After 15 months and finishing near the top of his MBA class, Mendello jumped at the chance to work for CBS and was soon rewarded by getting to work on one of the biggest sports sales of the century – the sale of the New York Yankees to George Steinbrenner. “I did a lot of the leg work on that sale working with the treasurer and financial VP at CBS,” said Mendello. “Being a huge Yankee fan, I was excited to meet some of the players.”
Reflecting on his career, Mendello offered advice to MBA students today. “Don’t narrow yourself down. Even though I focused on finance, I had a lot more flexibility than finance because of the marketing and management courses I took in the MBA program which helped me in the future being a CEO.”
- By Daniel J. Stoll