Hedge-fund managers have no long-term interest in the industry, any more than book fair hosting companies have. Publishing is incidental, not central, to their thinking.
Per the Wall Street Journal, KKR is selling RB Media, which calls itself the world’s largest audiobook producer, to another hedge fund, HIG Capital, for the tidy sum of $1 billion plus. A drop in the ocean for KKR, which the WSJ says controls $500 billion in assets. But money that will help smooth the Simon & Schuster bid.
Hedge funds have a reputation for buying, dismantling and throwing away the pieces of their acquisitions with callous disregard for the human cost.
To be fair, we’ve not seen that happening with the recent trend for hedge funds to buy into the publishing industry. In fact Waterstones, Barnes & Noble, RB Media, OverDrive and countless other examples suggest maybe the reputation is undeserved.
And yet one cannot help but be nervous about KKR’s interest in buying Simon & Schuster. Not specifically because its KKR, but because of this shift in control of the industry into the hands of a small number of investment firms that, when the going is good, unquestionably bring enormous benefits.
But what happens when the going gets tough?
The upside of this trend so far has been that the hedge funds cough up the cash and then adopt a hands-off strategy and allow the business management to do what they feel is best.
And that will be good news for Simon & Schuster if KKR wins that prize.
But the publishing climate is changing. Real sales (as opposed to notional profits built on raising prices to consumers) are at best stable, and in many instances in decline. Economic uncertainty lies ahead, supply-chain issues remain unresolved, and many publishers are already shedding staff. Others will soon follow.
Publisher-owners who have long been part of the industry have to take difficult decisions, and their long-term commitment to the industry will govern those decisions.
For hedge-fund managers, the decision is easy: is there more profit to be had or not? And if not, what are the options to exit without taking a hit?
Hedge-fund managers have no long-term interest in the industry, any more than book fair hosting companies have. Publishing is incidental, not central, to their thinking.
And that makes the potential acquisition of Simon & Schuster by KKR a concern, no matter how good KKR’s track-record so far.
