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BW Businessworld

It's Good To Buy

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Sketch this scenario. You want to write a book. A technical one that requires plenty of research. A publisher likes your idea. And he sends across three-four people to camp at your home to help create the manuscript from scratch — from the kernel of the idea to doing the research and transcribing the author's note to make it in to a coherent manuscript. This is a very familiar premise to well-established Indian publishing firms, but equally alien to corporate publishing houses. They expect the author to deliver a complete manuscript to them. It is a cruel reality that is impossible to monetise, but is a crucial factor in assessing the "worth" of a publishing company for an acquisition and merger. Acquiring titles in India is difficult, but even tougher is the process of continuing them. Family-held concerns had their unique style of bonding with authors, which a corporate may not enjoy. Corporate publishers work on timelines and targets that a typical Indian author is not used to.

And that takes us to the vital subject of mergers and acquisitions in publishing. Earlier this month, two acquisitions were announced in the Indian publishing industry. The first was Medical information publisher, Wolters Kluwer, acquiring Mumbai-based publisher of scientific, technical and medical (STM) open access journals, Medknow, for an undisclosed sum. It also furthers the company's growth strategy of continued investment in international expansion in key emerging markets across the globe. The second acquisition was by CL Educate (formerly Career Launcher) of G.K. Publications. With this strategic deal, CL Educate aims to further its stronghold in test prep and skill education verticals. Earlier in the year, there were two other significant acquisitions — Pearson, the world's leading learning company and owner of the Financial Times and Penguin Books, announced in June that it has increased its shareholding in TutorVista, a fast growing Indian education company, to a controlling 76 per cent stake for a consideration of Rs 577 crore. In August, Bloomberg entered an agreement to acquire all of the outstanding shares of the Bureau of National Affairs for $39.50 per share in a cash tender offer followed by a merger for a total purchase price of about $990 million.

The Buy Buy Situation
Some of the other notable acquisition and mergers in publishing in the recent past have been in November 2007; Macmillan India bought 80 per cent stake in Frank Brothers in June 2008. LexisNexis Butterworths India acquired legal publisher Wadhwa Nagpur through its Indian arm in May 2010. ACK Media, which owns the Amar Chitra Katha brand, bought India Book House (IBH) to emerge as one of the largest integrated publishing and distribution firms in India. Last month, BPI, a children's book publisher, has become a part of the S. Chand Group by combining their interests in school textbooks and children's literature. Some of the more notable international A&M have been in 2002 when John Murray (known for having publishing Lord Byron) was acquired by Hodder Headline, which itself was acquired by French conglomerate Lagardère Group in 2004.

Since then, it has been an imprint under the Lagardère brand, Hachette UK. Hachette also bought Time Warner Books in 2006; BBC bought Lonely Planet and Bloomsbury bought A&C Black Plc in July 2000. Or for that matter, the Taylor and Francis group that more than doubled in size with the acquisition of the Routledge Group of companies, which includes Routledge, Spon Press and Carfax. The acquisitions have continued with additions to the growing lists from Cavendish Publishing, Martin Dunitz, Europa Publications, Gordon & Breach, Curzon Press, Fitzroy Dearborn, Garland Science, Bios Scientific Publishers, Frank Cass and CRC Press.

Internationally, publishers - whether general or law or scientific, technical and medical (STM)- have grown through M&As. There are multiple reasons for adopting this strategy of inorganic growth in any industry, but a very tough area to venture into in publishing. It is usually only considered by companies with lists that have a global appetite (science, technology and medical or legal), preferably with archives and a forward list with a sound value of copyright. Other factors are to add to the core content and increase their portfolios; to access specific channels that would be otherwise tedious to develop from scratch and to grow in what are otherwise saturated markets.

India Growing
In India, the scenario is a little different. It is the only territory in publishing, globally, that has a rapid rate of growth in print and electronic forms of publishing. Having said that, today the situation in India is similar to what was there in the US and Europe about 30 years ago. The Indian publishing industry is primarily family controlled, mom and pop stores with no professionalism. Publishers here have not attempted to buy out other publishers (this is about to change, though, it seems). With immense competition, in a small pool of talent and lists, there is tremendous duplication of titles leading to low revenue for everyone. Another reason is poor distribution methods. The publisher is at the mercy of the distributor/book seller to sell his book. Even if he has a good title, the distributor who is also a publisher will have a similar title and will push his tome. Primary school books is an exciting area. However, each state has its own curriculum and this will make things difficult. Education is a state subject. That said, once again, the few strategically poised M&A have taken place in academic and education.

The norm in Indian publishing (so far) has been to enter strategic alliances or co-publishing arrangements such as the one John Wiley & Sons have with Ratna Sagar, Zubaan-Penguin, Ravi Dayal-Penguin, Black Kite (Permanent Black) -Hachette; HarperCollins-Mapin (specifically for the children's list, but it has been discontinued); Westland-Blaft and Taylor and Francis with Anamaya for STM journals.

According to Deepak Kapoor, CEO of Manupatra, "there are four reasons why M&As have not happened here. First, the insecurity of publishers post acquisition. Next, the size is small for a foreign publisher to invest time and money and third is accounting is not up to the mark. Finally, most are family-owned and, therefore, some members are not keen for M&A." In this context, it is not surprising then what Vikas Gupta, Managing Director, Wiley India says of their alliance with Ratna Sagar. He says it is of a 1:1 expertise and is the future of publishing. "From a strategic perspective, it is a niche content to create a solution-based approach," says Gupta.

The future of acquisition and mergers in publishing, globally or within India will be worth watching. Industry sources say this is a possible area to invest in, but only if a worthwhile candidate is available. It is also claimed that during a period of economic gloom (as is evident globally), the book manufacturing machinery part is the steadiest as it is corroborated by a visit to some presses in India where small perfect binders are ready to be shipped. If they sell equipment, business must be good.

Jaya Bhattacharji Rose is an international publishing consultant and critic
She can be contacted on [email protected] Follow Jaya on Twitter @JBhattacharji