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Professional Publishing Mergers and Acquisitions? Why Not?

Oligopolies? Reduction in healthy competition? Up go the prices. Down goes the quality. Customers in a stranglehold. 

Duopoly fear is discussed continuously. It’s a bad thing. Right?

I’m not so sure, my reason being that I want to see professional information thrive for all concerned – shareholders, employees past, present and future, customers, suppliers and society, and in the interests of the supremacy of law. My point is, what appears to exist now is hardly optimal, it’s clearly ripe for change and in this situation and for these purposes, I reckon market forces might produce a better outcome than the present one.

No doubt, great changes have occurred recently and we have seen massive metamorphoses of multinational media businesses. Thomson Reuters especially, has altered its character and Reed Elsevier must surely follow. Professional, financial and business information remains an important and profitable sector, involving high entry costs for outsiders. Inevitably, smaller, weaker, less-focused players, and those not fully committed to growth and innovation in the professional sector won’t be winners and some will disappear. Moreover, who wants to be Number 3, or worse, in a market?

Yet, one or two small but important competitors have established sizeable niches and have undoubtedly stolen market share from some of the established law publishing giants which, sometimes, at least in the UK, cling to the security attached to owning portfolios that include 200 year-old high-profit cash cows. The more nimble competitors sometimes can concentrate on attractive segments of the market and benefit from lower cost bases. There are, occasionally, opportunities for them in low-volume, profitable services geared to specific customer needs and, increasingly in the future, from innovative and entrepreneurial cultures and capabilities, making it easier for them to respond to changing market requirements. Notable, in that context, is the fact that in the 2010 BIALL Supplier Survey, only two names were classified as “Good”, those being Justis and Wildy. Every other relevant publisher was at best “Satisfactory” with a few being “Poor”. It’s questionable whether the market leaders have been sufficiently and consistently dynamic on innovation, customer care and on new opportunities, in order to defend their future positions and ensure that they are in the forefront of change. Some remain impressive, however flawed, but the mid-ranking stragglers can find themselves in neither one place or the other.

There is impressive competition everywhere; from Government, the Internet, self-publishing, the professional firms themselves, from new, hopeful information and services providers. The Thomson Reuters combination, News International’s acquisition of Dow Jones, Bloomberg’s alleged aspirations and others, show the way towards integrating the communications media sector. These developments indicate that it’s not enough to continue as before; that understanding and researching customer requirements involves knowing, in minute detail, how they work. Information providers, large and small, need to understand customers’ relationships with their clients and help them achieve their objectives. Without diminishing the essence of the publishing trade, the future is about intervening in the target customers workflow wherever possible and profitably. In so doing, they are more able to satisfy needs for compliance, added-value and strategic planning/litigation-oriented information, training, networking and communicating, documentation, tools, software requirements, marketing solutions, business development, and more. Undoubtedly, greater success is achieved when customers are delighted to spend fortunes and buy from publishers whose products, services and support provide a critical route to their own profit improvement. 

If this is the case, maybe it would be better to have two world-class, all-service behemoths that can match the needs of equivalent international professional and corporate entities. This might create more space for the innovators, specialists and nationally based publishers to flourish organically and by merger and acquisition. 

It would be wrong and presumptuous of me to opine excessively about what goes overseas but, taking the UK as an example, what an appealing provider would be created by the combination of the Thomson Reuters and Wolters Kluwer businesses. As a publisher, TR has no significant presence in the tax and accountancy markets while WKUK is almost invisible in law. Meanwhile, LexisNexis enjoys the advantage of being the only provider that can fully meet the needs of the legal, tax and accountancy professional markets. In mainland Europe, Wolters Kluwer is Number 1 or 2 in most (unconnected) markets but that great unspoken, the fact that each country has a different body of laws and they all speak different languages, puts something of a constraint on integration. One can see why Reed Elsevier conceded LexisNexis Deutschland to Wolters Kluwer. In the US, Thomson Reuters and Wolters Kluwer (via CCH) see themselves as rivals in the tax market, where LexisNexis is less visible but WK’s weakness in law suggests that LexisNexis and WK would be good bedfellows to counter TR/Westlaw. Concerning Canada, I defer to Gary Rodrigues’ insight. Speaking in generalities and conscious of the many exceptions to weaken the statement, for the most part, Wolters Kluwer comes from and is most comfortable in the European, multi-lingual, Civil Law tradition while Thomson Reuters and LexisNexis are happier in that of the English-speaking, Common Law world. This suggests that the CCH brand, except in the UK, would fit well with Reed Elsevier, while Thomson Reuters would be better placed for growth in the UK and Europe with the addition of the WK businesses. Despite its snappily entitled research platform, Wolters Kluwer is without the power of an established globally-branded one, rivalling Westlaw and LexisNexis. Furthermore, other than CCH, WK uses a range of brands, particularly in Europe; another reason to see its future with its present competition. 

Of course there is nothing new here and even apart from the continual rumours, the possibility of a Reed Elsevier-Wolters Kluwer was a real story in 1998. Allegedly, the deal was aborted or withdrawn after EU regulators expressed concern that it would threaten competition in the publishing industry. The EU Competition Committee ruled that they could merge if the combined business sold certain legal and tax properties. Apparently, Wolters Kluwer, which was asked to sell assets it considered essential to its main business, unsuccessfully requested Reed Elsevier to renegotiate the deal. One wonders, however, the extent to which jostling for where management power would have lain, might have effected the failure. That was then and I suspect that nowadays, in the size and scale of things, the shenanigans of the relatively insignificant business of tax and legal publishing information would not raise many eyebrows.

That done, what an opportunity, certainly in the UK, for the smarter players to sweep up and make sense of a few stragglers like Jordans, that long-established business that offers potential for information and workflow in corporate law and market leadership in family law. There are PLC, Informa Law, Hart Publishing, Globe Business Publishing, Wilmington, XPL Publishing and others, some of which might be waiting for an offer they can’t refuse, assuming they’d value a godfather. 

In mainland Europe, one wonders when and where the likes of Editions Lefebvre Sarrut and CH Beck , indeed all those in the Law Publishers in Europe  group that are not already part of TR, LN or WK, will go. Undoubtedly they are long-coveted targets rather then acquirers.

So, roll on Thomson Reuters Kluwer and LexisCCH, until, of course, Bloomberg LexisCCH!

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Comments

  1. Gary P. Rodrigues

    In his post, Robert McKay makes the case for a major realignment of the commercial legal publishing industry and suggests that the market would be better served if there were “two world-class, all-service behemoths that can match the needs of equivalent international and professional and corporate entities”.

    Around them would exist a cluster of smaller more innovative companies that would provide complementary products to those offered by the two behemoths. In his view, competition between the two behemoths and with the growing number of smaller commercial and free services has lessened, if not eliminated, any negative competition issues that would result from such a realignment.

    While the market is as Robert says, “clearly ripe for change”, the realignment he suggests is not likely to happen. The current owners of these companies have lost faith in the prospect of legal information as a source of growth. If anything, they are likely to be seeking a means of easing out of legal publishing sector altogether. The best example of this is Lexis, which has shifted its energies to developing its Risk business (based on the Choicepoint acquisition), while the further development legal publishing business has been largely ignored.

    Interestingly enough, in recent conversations, Robert has suggested the most likely option – a sell-off of legal information divisions of the two behemoths to new players in the market with fresh visions as to how to capitalize on the assets of the old time legal publishers. Robert pointed out that UK publishing businesses and assets are regularly transferred from one owner to another every decade or so, and that the legal publishing industry was overdue for major changes in ownership. It is as if the industry is sitting on the San Andreas fault waiting for the next earthquake.