by Ian Port
Doubt now filled Leo like his pens and tools filled his breast pocket. Everywhere he looked, the world—even the little corner of which he was ostensibly in charge—seemed unrecognizable. In music, mop-headed youngsters in stovepipe suits had replaced cowboy jazzmen in Stetsons. Their songs were loud and simple, their guitars often deliberately distorted. Leo didn’t see the appeal. Music fans now carried around tiny radios powered by a transistor. Leo, along with many observers, believed the device would render vacuum-tube amplifiers obsolete. And lacking any formal education in engineering or electronics, he couldn’t venture into the new, transistorized world.
He was a product of the age of home inventors and backyard tinkerers, untrained men who could build or fix almost anything because, back then, anythings were simple: cars had carburetors, not fuel injection; radios and amplifiers were a few wires soldered to a handful of vacuum tubes and a speaker. Now cars and electronics were built, it seemed, by scientists. The world had utterly changed, and if some part of that was Leo’s doing, it was of little comfort when the new currents threatened to sweep him into irrelevance.
Introverted to the core, Leo Fender was happiest when experimenting alone or working closely with people he knew well. By 1964, the Fender factory had exploded into a hydra that seemed to need a voluble, outgoing leader of its own, someone who could take its reins and drive its small army into an even more prosperous future. Leo Fender had no desire to fill that role.
The idea of selling Fender first surfaced in a 1957 letter written by a hired accountant who suggested that Don and Leo sell the company to him. That idea went nowhere, as did a February 1962 proposal that the accountant made on behalf of outside buyers.
Leo had made another suggestion to Randall: buy him out for $1 million. Randall, however, probably assumed that his partner was in the depths of another strep infection. Six months after initially floating the idea, Leo told Randall his price was now $1.5 million. By August 1963, the number had risen to $2 million, according to a document written by Randall and unearthed by historian Richard Smith.
It would have been a great deal for the buyer: Fender was soon selling $2 million in merchandise every quarter, and earning more than a million dollars in pretax profit every year. Randall, however, was deeply wary of the idea of buying out Leo like this. He’d seen plenty of others take advantage of Leo’s myopia and generosity, musicians who came in with sad stories seeking new guitars, only to pawn them to settle gambling debts or divorces. The relationship between Don and Leo was deeply troubled, but Randall didn’t want to cheat his partner. “If I bought it now, a year from now, you would say I robbed you,” he told Leo. “You’d hate me.”
Randall also suspected that Fender was worth far more than Leo realized. He decided to pursue acquisition by an outside firm—one big enough to handle Fender’s thriving business and intractable backlogs, and with pockets deep enough to pay what it was worth. Early in 1964, delicately and without drawing much attention, Randall spread the word that the Fender companies, stupendously profitable but chronically hobbled, were for sale.
That summer, Randall saw an opportunity to court the Beatles, as the band embarked on its first proper tour of the United States. After beginning in California, the trip brought the Beatles via chartered plane to Forest Hills Stadium, outside of New York City, on August 28 and 29. According to Andy Babiuk’s authoritative history of the Beatles’ equipment, Randall sent a deputy to New York to try to meet with Brian Epstein and encourage the Beatles to use Fender gear. This encouragement, however, was to include something unusual for Fender: cash.
“It was a huge amount, I can tell you that much,” Randall told Babiuk. “Not by today’s standards, of course, but it was a lot of money for us at the time.” Other sources have pegged Fender’s offer at $10,000—enough, in 1964, to buy a pair of brand-new Chevrolet Corvettes. Of course, along with the money, the Beatles would be able to get all the Fender equipment they wanted, free of charge. Meanwhile back in Fullerton, an oblivious Leo Fender continued to tell even close family that his firm never paid artists to use its instruments.
It’s unclear why Randall sent Jim Williams, his advertising director, to meet the Beatles, rather than go himself. Since the company’s earliest days, whenever a salesman struggled to close an important sale, or when there were major deals near consummation, Randall would bring to bear his own forthrightness and charm, usually with success.
Williams, however, seems to have been a mess. According to Babiuk, he was frayed by nerves ahead of the big meeting in New York. The stadium where the Beatles were playing was built as a venue for tennis competitions and sat adjacent to the quaint, village-like downtown of Forest Hills. To calm himself before going to see the Beatles, Williams apparently stopped at a local watering hole and put back a cocktail or two. By the time he made it over to the tennis stadium, Williams was likely past the point of business-friendly lubrication. He met with one of the Beatles’ submanagers, clumsily presenting Fender’s offer. It must have had all the charm of a naked bribe: $10,000 to play the company’s instruments, plus all the free gear the Beatles could ask for.
Williams didn’t get past that first meeting. As Randall told Babiuk, the Fender representative never even got to speak with Brian Epstein, the Beatles’ all-powerful manager. Rather, he was fended off by one of Epstein’s deputies. The Beatles’ response to Fender was simply, as Randall put it, that “the boys had been successful with what they were playing, and they were going to continue to use that.” Neither Williams nor Randall could find a good counterargument.
Rather quickly, it seems, Randall realized the blunder of this gamble. Fender was a giant by the standards of the electric instrument industry of 1964, and the Beatles looked upon its products favorably, even if they weren’t then using them. The offer, clumsily delivered, made the company look domineering and desperate.
The botched maneuver also proved the paranoia of F. C. Hall and his Rickenbacker salesman quite justified. “I felt I’d broken my cardinal rule, but it was imperative to do it,” Randall said of the episode. He must have also realized his mistake in sending Williams to close a major deal, rather than going himself. It was one he wouldn’t make again.
33.
“HE IS CLEARLY NOT GROWTH-MINDED”
FULLERTON AND NEW YORK, SUMMER 1964–WINTER 1965
The first real interest in purchasing Fender came from the D. H. Baldwin Company, a large Ohio maker of pianos and organs. Owning Fender would mean instant entry into the booming market for electric guitars, and Baldwin executives quickly began negotiating with Randall. Leo stayed behind in Fullerton, leaving it entirely to his partner to sell the companies. By July of 1964, Baldwin was throwing out numbers that made Leo’s earlier request, for $1.5 or $2 million, look hugely shortsighted. In the guitar-crazy, post-Beatles landscape, Fender, it seemed, could go for something closer to $10 million.
There was one hang-up. By 1964, Leo had invested in two somewhat risky enterprises that lurked uneasily on Fender’s fringe: the acoustic guitar division, overseen by German luthier Roger Rossmeisl, and the electric piano project run by Harold Rhodes. Neither of these had yet earned a dollar in profit, and neither looked to have a much brighter future. By July, Baldwin had agreed to pay a hefty price for Fender, but it didn’t want the acoustic or electric piano businesses. Randall, however, insisted that the company give Leo at least the cost of his investment in the two operations, some $470,000. By mid-August, he had the Cincinnati contingent convinced, with Baldwin offering the following terms: It would pay market value for all of Fender’s assets, about $4 million. Then it would pay Don and Leo 50 percent of after-tax profits up to $5 million, or for fifteen years, whichever came first. The deal even included $470,000 for the acoustic and Fender-Rhodes companies.
All the boxes were checked. The amounts were tremendous. Baldwin was an experienced musical instrument company that, through its organ projects, had a deep familiarity with electronics and amplification. It seemed l
ike a great new parent for Fender.
But by then Baldwin was no longer the only suitor. That summer, while fighting to get Baldwin to pay Leo his $470,000, Randall had considered other options, including taking the company public. A financial adviser counseled against this and instead put Randall in touch with representatives from Columbia Broadcasting System in New York. Soon Randall was shuttling back and forth to Manhattan, meeting at hotels with representatives from CBS’s Columbia Records division. One was a promising young executive named Clive Davis, who couldn’t understand CBS’s interest in a musical instrument manufacturer. Under CBS president William S. Paley and Columbia Records president Goddard Lieberson, however, “synergy became the byword,” as Davis recalled in his memoir. The broadcast firm was growing at an enormous rate, acquiring interests far out of its core specialty—including, that year, the New York Yankees baseball team.
Through that summer, Davis worked to determine whether Fender would make a smart addition to the growing CBS empire, and whether it could get a fair price for the California company. To decide this, the New Yorkers called in outside help: a consultant that would evaluate every aspect of Fender and advise whether CBS should acquire it.
Remarkably, even as observers from the Arthur D. Little consulting firm visited Fender, interviewing managers and salesmen, reviewing catalogs, and asking pointed questions, no one at either the Fullerton factory or the Santa Ana sales office guessed that the company employing them might soon change hands. Everything seemed to be working as normal—except, perhaps, for Leo Fender himself. Starting that summer, Forrest White noticed that Leo seemed quieter than usual, more distant even than was his introverted habit. Leo was absent from the factory more than in the past, and there weren’t as many new ideas coming out of his lab. Even Leo’s right-hand research-and-development man, Freddie Tavares, had noticed a change in his boss. He figured that Leo was simply slowing down, his drive to best the competition fading. His apparent apathy seemed deeply out of character, though.
That fall of 1964, the Arthur D. Little consultants released a forty-page analysis of Fender’s past, present, and future, along with an assessment of the electric guitar industry as a whole. It is a fascinating document, both for what it perceived and what it missed about the company and the times. “Unquestionably, Fender’s name ranks very high in the industry,” the report said. “It has established a reputation for producing a first-quality instrument. . . . Fender’s major competitor is Gibson, [which] enjoys a position almost on a par with Fender in the top-quality guitar market.” Asking whether any competitor enjoyed a natural advantage over Fender, the consultants concluded, simply, “No.”
The report detailed the “excellent” design of the amplifiers and guitars, explaining to CBS executives that “Fender amplifiers can be kicked, dropped, vibrated, or allowed to overheat, and still continue to give excellent service.” There was no improvement to be made there. Yet the observers were appalled by Fender’s lack of college-trained technicians and surprised to find that “virtually all of the engineering talent is concentrated in Mr. Fender himself.” They saw an absence of formal education all across the company. Of Fender’s nine salesmen, spread around the country, they wrote: “The men we met were presentable, articulate, and possessed of considerable sales enthusiasm and drive. They are a little rough in terms of social polish. Few, if any, have college degrees. They are probably very well suited for the type of trade they call on and are obviously doing a good job.”
Also shocking to the consultants was the “rather substantial compensation” earned by the salesmen, as well as by Leo, Don, and senior managers like George Fullerton and Forrest White. Remarkably, in their interviews with the Arthur D. Little consultants, Forrest White and Don Randall apparently kept the dysfunctional relationship between the sales office and the factory completely concealed. The outsiders had no idea that White was basically guessing which products and how many of each Fullerton should build each day.
Randall, having enchanted the consultants, was deemed to be worth his pay. In fact, the report recommended that CBS should purchase Fender on two conditions: first, that it got a reasonable price; second, that “Randall’s enthusiastic services are secured.” The president of Fender Sales was found to be integral to its marketing activities and in command of “strong loyalty” from its staff—only natural, since they viewed “his leadership as the factor which has primarily contributed to their economic success.”
Of Leo Fender, that self-taught, half-blind, now half-deaf factory denizen, the consultants took a drastically different view.
They couldn’t help but note some of Leo’s talents. “He has the successful, practical inventor’s genius for detecting early those relatively small design features in a new product which will be the ‘right way to do it.’ ” But they framed Leo’s achievements in a way that, however accurate, served to diminish their importance. “Most of these developments do not involve either highly theoretical or complex concepts. They involve rather simple practical elements; for example, the offsetting of the side depressions in the body of a guitar so that it will fit the contours of the body more comfortably.” True as this was, the consultants, as nonmusicians, didn’t seem to appreciate how much difference those simple practical elements had made.
Apart from Leo’s designs, the consultants quite accurately found Leo an odd fit for the Fender of 1964. “Mr. Fender finds it hard to believe that the little business which he started in the late Forties has grown to such proportions. He finds that the size of the business is such that he has virtually no time left for doing what he enjoys, namely, engineering. He is clearly not growth-minded. Mr. Randall, on the other hand, immensely enjoys his ever-widening sphere of activity.”
Along these lines came their verdict. Randall, the report said, was essential if CBS was to succeed in running Fender. But if the purchase went through, the consultants viewed “a sharp diminution in [Leo’s] contribution . . . as a relatively minor risk.” His responsibilities in overseeing production could be handled by any competent engineer. As for developing new products, “it would be highly desirable, at least for a period of four or five years, to maintain the active interest and creativity of Mr. Fender.” After that, the consultants suggested, CBS engineers could surely design and introduce successful new electric instruments on their own.
The consultants’ report changed the tenor of Don Randall’s discussions with CBS. He finally informed Baldwin that he was in talks with other buyers and took every measure to strengthen his bargaining position. He had the wind at his back that year, with the arrival of the Beatles and the subsequent realignment of America’s tastes in pop music. Gone were the saccharine solo singers, the cutesy novelty dances, the songs written by Brill Building pros. Back was the age of the pop-rock group, with the Beach Boys suddenly upping their game to compete with the British Invasion bands. Even the American folk music revival, which long saw itself as the antidote to a mainstream of inconsequential pop, would soon meet its end (as such) in the aftermath of the British Invasion, done in by a Fender Stratocaster and a former folkie from Minnesota.
The Beatles may not have used Fenders, but they exploded American teens’ interest in electric guitars, and Randall played the new landscape to maximum advantage. Previously, he’d forced his salesmen to hold down new orders to what they thought the factory could reasonably produce. While negotiating with Baldwin and CBS, Randall, according to historian Richard Smith, told them to instead take all the orders they could possibly get. Fender’s sizable factory backlog grew even longer, and conjured visions of huge profits in the minds of the New York and Ohio negotiators. Randall watched the offers from CBS, in particular, grow higher and higher. He’d later say that these negotiations, which he likened to forging a Middle East peace accord, were the most exciting period of his professional life: “Everything afterward was anticlimactic.”
Early in the fall, CBS executives floated a number that Randall received with terrific excitement.
Fender’s financial adviser wanted to push for more, but Randall was satisfied. The total amount of the deal would be $13 million—an immense sum for a relatively obscure commercial enterprise, and a historic price for an electric guitar company. The offer included the Fender factory in Fullerton, its sales office in Santa Ana, and its service center in Tulsa; the V. C. Squier Company, maker of Fender strings, in Michigan; and—crucially—the acoustic guitar and Fender-Rhodes divisions. It would also include a plot of land next to the existing factory, owned by Leo, on which a new manufacturing plant was envisioned. Randall was to be kept on as vice president and general manager of CBS’s new Fender Musical Instruments division, and given a $50,000 salary (with bonuses) and a corner office in New York. Leo would be hired as a design consultant for five years and couldn’t do any competing work for ten. This, it seemed to Don and Leo, was it. Fender had grown from two tiny tin sheds and a radio wholesaler to a potential new division of the Columbia Broadcasting System. The offer had all the prestige, and money, that the company’s two leaders could have hoped for.
So on October 16, 1964, an agreement was signed outlining the terms of CBS’s purchase of Fender. The deal was to be kept secret until the following January, and it mostly was. No one in Fullerton or Santa Ana had any idea of the major changes about to occur until that December. It was late that month when, on a cool winter evening, Forrest White went over to see Leo in his lab.
The founder and inventor presented a humble sight: seated at his messy workbench, he huddled near a small heater, pulling his jacket up over his neck to stay warm. White could hear Leo sniffling, still suffering from his strep infection. It was obvious he should have been at home, in bed, instead of working late into another evening.