The recent purchase of Walker Publishing by Bloomsbury notwithstanding, the weak dollar is not expected to result in a surge of acquisitions of U.S. houses by foreign companies, although, as one merger specialist noted, international publishers "continue to shop the U.S." Although a weak dollar has contributed to increased investment in the U.S. in the past by overseas companies, that is not expected to be the case this time. Kit van Tulleken, whose company brokered the Walker purchase, explained that while the weaker dollar may make the initial purchase cheaper, when foreign companies convert sales made in dollars back to pounds or euros, revenue and earnings will decrease proportionally. (Look for plenty of "constant currency" explanations in forthcoming earnings releases from foreign publishers with U.S. holdings.)
While the cheap dollar may not provide an extra boost to publishing mergers this year, an improving economy, the return of financial buyers and companies flush with cash should result in more merger and acquisition activity in publishing in the 2005, although there is little likelihood the industry will return to the go-go days of a decade ago. The biggest deals will likely be in the professional and education segments, M&A experts agreed, and no one was expecting a blockbuster announcement on the trade side. Joe Berkery, who heads up Berkery, Noyes & Co., predicts that the entire information industry will see an increase in mergers this year driven by "lots of electronic publishing related deals."
Although there are publishers on the prowl for trade companies, there is a lack of quality houses for sale. "If we found a decent property, we know we could sell it," said Bob Halper of Cowan, Liebowitz & Latman. Robert Broadwater of Veronis Suhler Stevenson had a slightly different view, observing that during any recession, including the most recent one, companies become more selective about the companies that are interested in acquiring, focusing on unique properties, a strategy that limits the available acquisition pool. Kit van Tulleken noted that many independent companies had difficult years in 2002—2004, prompting their owners to try to improve results before looking to sell. Joe Berkery attributed the dearth of trade deals to the fact that many companies, especially the larger publishers, are looking to buy product lines, rather than entire companies. As one observer noted, the largest houses "aren't looking for more books to publish."
What publishers are searching for are distinctive properties. If Peter Workman decides to sell Workman Publishing, experts agreed, publishers would line up to bid. Other trade publishers with strong niches that would attract interest include Andrews McMeel and Chronicle Books.
While experts said they don't expect the cheap dollar to accelerate cross-border deals, neither do they expect the currency situation to dampen enthusiasm for the U.S. market. To be a major publisher on the world stage, a company needs to be an English-language publisher, experts noted. There is some speculation that Hachette, which broadened its English-language beachhead last year with the purchase of Hodder Headline, could be preparing for another run at the U.S. market. "A European company would be interested in buying something of scale if it came up," van Tulleken noted. "A good acquisition is a good acquisition no matter what the exchange rate is."