The Rewards and Challenges of Acquisitions and Mergers
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Opportunities often arise when we least expect them, as several independent publishers have found in connection with acquiring other companies and their lists.
Because they tend to be flexible and creative in their business strategies, independent publishers generally are well positioned for such acquisitions. But those who have traveled this route to growth report that it’s important to consider all aspects of the process and to plan for the challenges that growth entails.
Fledgling companies can get a big boost from acquiring the lists of publishers who are leaving the marketplace. Such was the case when Bitingduck Press acquired Boson Books’ list in 2012. “Being a new publisher with many questions, I had contacted their editors for some advice regarding e-book distribution,” says Jay Nadeau, editor-in-chief at Bitingduck.
“After several conversations, the Boson editors said that they were preparing to retire and sell their imprint, and would I be interested?”
To ensure against hidden liabilities and misunderstandings, Bitingduck hired an attorney who specialized in small-business mergers to work on the acquisition. At the time, the company was a small operation with only three signed authors. By taking on Boson, it added more than 150 titles and 50 authors.
“This increased our visibility, and we began receiving a large number of submissions,” says Nadeau. The expanded list included titles in special-interest areas, one of which was maritime fiction. “After the merger, we found that this became our bestselling genre,” Nadeau reports. “It also included the most active authors from the acquisition.”
As in the case of Bitingduck, a prior relationship led to the acquisition of Surrey Books by Doug Seibold of Agate Publishing. Through mutual friends, Seibold had met the owner of Surrey Books, which had specialized in books on food, entertaining, and nutrition for 25 years. When the owner decided it was time to sell, the companies entered into what Seibold calls a “mutually beneficial” seller-financed arrangement that was finalized in 2006.
“I felt comfortable with the kind of content Surrey was publishing,” Seibold says. “I also had some specific ideas about ways I wanted to expand the imprint. And I had bootstrapped Agate since founding it in 2003, so acquiring an existing backlist was an immediate boost.” In addition, he notes that Agate benefited from new accounts with several distributors.
Opting to Get Even Bigger
For large, well-established presses, acquisitions offer strategic opportunities for growth. Recent acquisitions by Graphic Arts Books include lists from two smaller presses: Pruett Publishing, a family-run publishing business; and Companion Press, run by a sole proprietor who published photographic books by well-known photographers of landscapes and wildlife in the American West.
“In both circumstances, the owners wanted to retire from book publishing and find a good home for their authors and titles,” explains Doug Pfeiffer, publishing director at Graphic Arts. “These types of acquisitions generally go pretty smoothly,” he notes, “because the parties are not dealing with office and warehouse leases, staff reductions, or authors who might be anxious for reasons ranging from past-due royalty payments to fears about what the buyer might do with their titles.”
Sourcebooks is another company that has enjoyed growth and success due in part to its acquisitions strategies. “In every acquisition that Sourcebooks has done, we’ve brought in new opportunities that expanded our existing list and market channels,” explains Deb Werksman, editorial director of the Sourcebooks Casablanca imprint. “We’ve been very deliberate about it and have pursued only what we could integrate holistically. So for us, every acquisition has been an expansion and has moved us to a new level.”
Challenges That Crop Up
Regardless of when and how it occurs, growth always brings challenges. In the case of Bitingduck’s acquisition of Boson Books, Nadeau and his team took on some technical titles with complex formatting that demanded quickly learning to use various software tools. Although it was a young company, Bitingduck was well positioned to meet these technical challenges. “Basically, we’re a bunch of nerdy 15-year-olds,” Nadeau says of himself and his staff.
Another challenge for Bitingduck was collating sales reports and generating royalty statements for a much larger catalog and pool of authors. “It was a very fast learning experience for us, and somewhat complicated by sales reports and payments being sent to both companies for the first few cycles,” says Nadeau.
With the sort of innovation that is a strength of independent publishers, Bitingduck’s technology director used his programming skills to write custom software for calculating royalties. “This has been an enormous help,” Nadeau reports. “It takes us only a couple of hours twice a year to do the royalties now.”
Distribution is one more challenge that acquiring presses face. In tandem with his acquisition of Surrey Books, Seibold switched to Surrey’s distributor. “This was a difficult decision, as I liked my distributor,” he says, “but it was clearly the most sensible decision. Surrey’s distributor had been selling that list for a quarter-century and knew it inside and out, and Surrey’s backlist inventory was several times as large as Agate’s at the time.”
Nadeau also notes that establishing relationships with the authors of acquired titles can be challenging. “Some were personal friends of the former owners, and it was hard to win their trust,” he says. “Some immediately asked for their rights back, and we had to convince them that we were working hard to market their books.”
When a larger press takes on staff as well as titles, Werksman notes, the former owner may feel challenged by working with a big team. “Previous staff may be feeling uncertain and wondering how their roles will change, and there may also be cultural differences to get used to,” she says. “The more we can do to help them figure out how to get things done, the smoother the transition goes.”
Factors to Focus On
Take your time when you’re contemplating an acquisition, Seibold advises. “Since buying Surrey Books, I’ve considered several other acquisitions, and I came very close to buying two other companies—one smaller, one larger,” he says. “But ultimately I didn’t move forward with either because I couldn’t get the price the companies merited.”
“This was difficult,” he adds, “as in each case I spent close to a year considering the opportunity and became emotionally invested in seeing it through.”
To assess the value of a potential acquisition, Pfeiffer suggests reviewing a complete and accurate list of assets, including royalty contracts, copyright registrations, inventory, sales records, subrights arrangements, and contact lists. He also recommends evaluating how prepress assets are stored, since current digital files are worth more than old film flats, pasteup boards, and files in outdated formats.
In addition, Pfeiffer recommends checking rights agreements, terms of cancellation with distributors, and the logistics of book returns post-acquisition. “Get financial help to make an asset valuation analysis if you don’t know how to do that yourself,” he suggests, adding that the buyer and seller should sign a nondisclosure agreement (NDA) to protect the information and keep it confidential.
Additional assistance can come from companies that handle mergers and acquisitions, representing either the buyer or the seller. Pfeiffer also recommends working with an attorney to draw up legal documents such as the purchase agreement and the NDA.
As the potential buyer and seller work through the details of the acquisition, Werksman notes, it’s important to achieve a common vision. And in situations that involve the owner of the acquired press joining the staff of the acquiring company, she emphasizes the importance of clearly articulated goals. “It’s critical that these things be on the table as part of the discussion,” she says. “Some of our acquisitions have allowed press owners to focus on being authors, which makes them very happy.”
Once a deal is struck, the transition of assets must be accomplished. “Notification of authors, notification of distributors, and notification of the press must be handled quickly and efficiently,” Pfeiffer says. “Titles must be uploaded into the buyer’s database system and accounts notified that these titles are now available.”
For publishers weighing acquisition opportunities, Nadeau notes the importance of prioritizing. Seibold concurs. “Don’t let your heart overwhelm your head,” he says. “Extending the range of your business is important, but not if you don’t have a sufficient sense of what you need to do to succeed.”
All in all, Pfeiffer concludes, “Buying publishers or assets from publishers can be a good way to grow and expand your publishing house.” By being willing and able to take risks, by making good use of available resources, and by thinking in innovative ways about opportunities for growth, independent publishers are poised to maximize the benefits that come from acquisitions.
About the Author:
Deb Vanasse, who co-founded the 49 Alaska Writing Center and founded the author co-op Running Fox Books, is the author of 16 books. Her most recent are Write Your Best Book, a practical guide to writing books that rise above the rest; and What Every Author Should Know, a comprehensive guide to book publishing and promotion; along with Cold Spell, a novel set in her home state of Alaska. To learn more: debvanasse.com.
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