Publishers' Acquisition Activity Picks Up

The first half of 2014 was one of the publishing industry’s busiest six-month periods for mergers and acquisitions since the start of the Great Recession.

The combination of the economic downturn of 2008–2009 and the uncertainty about where the book business was headed as e-books began to take hold at the beginning of the current decade made it difficult to place a dollar valuation on companies, which, in turn, made the heads of both large and small publishers reluctant to get involved in the acquisition field as either buyers or sellers. That attitude began to change with the announcement of the Penguin–Random House merger. With the economy gradually improving and the slowdown in e-book growth providing a bit more clarity about the future of the book market, more executives have been willing to take the acquisition plunge. Indeed, in the view of some industry observers, consolidation is key to survival for companies that want to remain in the trade book business.

M&A veteran Martin Levin, who brokered Rowman & Littlefield’s May purchase of Globe Pequot Press, said large publishers, as well as independents, know that more resources are going to be necessary to

compete in today’s book environment. With purchase prices rising, smaller companies “are realizing it is a good time to get out,” Levin said. To help build the necessary size, several indie houses were involved in multiple deals in the first half of 2014. Rowman & Littlefield acquired the book program of Alban Institute plus Globe Pequot, while Open Road bought two of its e-book publisher competitors.

Even though prices have improved since the recession, valuing companies is till tricky. In Cowan, Liebowitz & Latman’s annual publisher seminar, held in May, Robert Giordanella, who worked with Levin on the Globe deal, said the method to value companies has changed. Now there is more emphasis placed on profits (usually measured by EBITDA) than in the past, when sales multiples were largely (but never entirely) based on revenue. Companies looking to make acquisitions are also considering more subjective factors, Giordanella said, such as whether a merger could lead to cost savings, and what new markets, both in the U.S. and abroad, an acquisition might add. With those different factors taken into account, he noted, it is hard to provide numerical guidelines on what publishing businesses are worth. One acquisition where both the purchase price and financials are known—HC’s pending purchase of Harlequin—is being done for just over one times revenue and eight times EBITDA.

Book Publishing Acquisitions, 2014

*This article has been corrected. An earlier version of this article incorrectly stated that Turner Publishing acquired Holiday House titles. Turner Publishing acquired Hunter House titles.