Bankruptcy and Restructuring at Marvel Entertainment Group

Bankruptcy and Restructuring at Marvel Entertainment Group

Bankruptcy and Restructuring at Marvel Entertainment Group

1. Why did Marvel file for Chapter 11? Were the problems created by bad luck, bad strategy or bad execution?

Before addressing its bankruptcy, it is necessary to have a general understanding of the company being analyzed. Marvel Entertainment Group began in 1939 as Timely Publications, a comic book publishing company that gained fame around the time of the Second World War. One of its most successful characters from this period was Captain America, who was often depicted fighting against the Germans. Other new characters came in the decades that followed, some of which still maintain popularity to this day, including The Fantastic Four, The Incredible Hulk, The X-Men, and Spider-Man. Attempting to reflect the general “psychological spirit” of the era (WWII, Cold War, etc.), many of Marvel’s creations in the mid-20th century fought against Communist foes. Editor-in-Chief Stan Lee helped usher in the ‘Marvel Age of Comics’ of the 1960’s, writing most of the superhero titles himself, and restoring many of the aspects from the late 1930’s superhero genre.

Skipping forward a few decades, Marvel Entertainment Group was bought in January 1989 by Ron Perelman for $82.5 million, financed using only $10.5 million of equity. The remaining portion was borrowed from a syndicate of banks led by Chase Manhattan, seeing this as a relatively insignificant amount for Perelman, given his past successes and likely future. Perelman had developed a reputation as a ‘corporate raider’ for buying and revamping companies that were underperforming and selling them for huge profits, and had been quite successful in doing so. Perelman did not have a clear blueprint as far as his plans for the company, but did have a vision for Marvel to serve as the foundation of a diversified youth entertainment company.

To achieve his vision, Perelman eliminated inefficient and...