Publishing Merger and Acquisition Business Brisk in 2014

Although the pace of acquisitions slowed in the second half of the year, 2014 proved to be very active for industry mergers and acquisitions. An improving economy, and more clarity about how the industry will move forward in a hybrid market that includes print and digital content, allowed some executives to feel confident about making purchases, while confirming for others that the time was right to cash out.

The year was highlighted by HarperCollins’s C$455 million acquisition of Harlequin, which was completed on August 1. While that acquisition was being finalized, a second major deal that had been in the works fell apart. Hachette Book Group’s plan to buy the Perseus Books Group and then sell Perseus’s distribution arm to Ingram unravelled at the last minute. The deal was originally set to be completed at the end of July, but, just days before the expected close, notices were sent to Perseus employees explaining that the parties were not able to finish the transaction by the end of the month. The deal was still expected to be completed by the end of August, but only a few weeks later, the purchase was called off, and the only statement came from Perseus, which noted that the three parties “could not reach an agreement on everything necessary to close the transaction.”

One of the reasons behind HBG’s bid for Perseus was to add more nonfiction titles to its list, and in November it reached an agreement to acquire Black Dog & Leventhal, publisher of illustrated titles and other nonfiction works. That purchase closed last week.

The maturation of the digital book market led two companies to make multiple deals in 2014: Open Road acquired two of its e-book publishing competitors in the first half of the year, and Vook bought two digital-content companies to add to its distribution and marketing platform.

A newcomer to book publishing, Start Publishing, a division of Start Media, made two purchases in the year and signed a distribution deal. The company’s focus is on building its presence in the e-book market, and that was the driver behind its agreement with Mason Crest to distribute Mason’s e-books to the trade market, as well its purchase of e-book publisher Whiskey Creek Press. Its second purchase of the year, Cleis Press and its Viva Editions and Tempted Romance units, was its largest to date and involved the purchase of print assets as well as Cleis’s e-book offerings. Start now has a backlist of more than 5,000 titles, and company president Jarred Weisfeld said that the company “has no plans to stop acquiring.”

In 2014 there were only three completed acquisitions of trade houses for which the sale price plus revenues of the targeted company were made public. The largest, of course, was HarperCollins’s purchase of Harlequin. Harlequin had sales in 2013 of C$398 million, making the sale multiple just over one times revenue. With Harlequin posting 2013 operating income of C$52 million in 2013, HC paid 8.7 times earnings for the company.

The buyers in the two other deals for which the financial details are known paid less than one times revenues. Fox Chapel bought Creative Homeowner from Courier Corp. for $1 million. According to Courier financial filings, Creative Homeowner had sales of $2.5 million in the first 11 months of the fiscal year ended Sept. 2, 2014, making the multiple about 0.40 revenue. The company also had a loss of $863,000 in the 11 month period. (In fiscal 2013, Creative Homeowner had revenue of $4 million.) Courier received $450,000 for Creative Homeowner in fiscal 2014, with the balance due in fiscal 2015.

Bloomsbury paid £4.6 million for Osprey Publishing, in a combination of £3.2 million in cash plus Bloomsbury stock, putting the sale multiple at 0.66.

Book Publishing Acquisitions, 2014

Publishing-related Acquisitions

Acquisitions Financial Details