Rashomon Like Views of the Thomson-Reuters Merger – and Why Bloomberg Is Gaining

The English media came back this weekend to re-examine the health of Thomson-Reuters and reached wildly different conclusions. The BBC talks of Thomson moving to establish hegemony over business data, whereas the Guardian focuses on the weaknesses of post-merger integration and the long-term challenge that Bloomberg presents.

The doyenne of the DC law library community, Jean O’Grady has a fascinating piece suggesting that Thomson may well acquire Wolters-Kluwer

Her analysis is:

Factors Favoring Such a Merger

1. Thomson Reuters Leadership Changes.Exane BNP suggests that TR appears to be “in restructuring

and crisis mode” since they failed to achieve top line growth through some new products including Westlaw Next.. The new CEO Jim Smith with his track record in legal, tax and scientific professional publishing may be better positioned to create new value from asset consolidation than top line growth.

2. Wolters Kluwer May be Ready to be Acquired. Former WK executives suggest that a merger has always been viewed as a good exit strategy if top line growth could not be achieved. CEO and Chairperson Nancy McKinstry has been in the Netherlands for 8 years and has not delivered expected revenue growth.

3. TR’s new IT  Platform Designed for Mergers. Since both companies generate over 80% of their revenue from electronic software and services, TR has the infrastructure to allow both companies to consolidate and reduce their IT costs. Apparently TR’s new IT platform was specifically designed to be able to integrate content from acquired companies. I have also heard this comment  from insiders at TR. (I whole heartedly agree that at least in the US, WK’s technical infrastructure as demonstrated by their “new ” Intelliconnect platform would benefit from an IT overhaul). Both companies have been trying to go global and have expanded their sale forces in some new and similar markets. The proposed merger would allow them to reduce duplicative effort in expanding their global footprint.

4. TR’s Balance sheet is Ready. TR’s balance sheet has absorbed the Reuters acquisition and the company  now has the financial capacity to launch such an acquisition over the next 12 months.

But remember that Bloomberg bought BNA for $990 million in August. Meanwhile Techbytes reminds us that Thomson and Bloomberg’s fates are inextricably linked.

It concludes:

Perhaps it’s time for Thomson Reuters to take their cue from Bloomberg and migrate from the costly dedicated terminal to a web platform in order to meet the changing needs of its customers. The legal market underwent tremendous changes in platforms between the 1980s and the 1990s, as user demands, technological advances, economic changes and ultimately the practice of law changed. Legal terminals morphed from huge dedicated stand -alone machines, to small customized boxes dubbed “ubiqs”, to multi-purpose personal computers. Lexis and Westlaw survived the loss of monthly revenue from equipment and created other revenue streams. Executive turnovers, reduced demand for some of its products, and mergers and changes in divisions have all befallen Thomson Reuters. Maybe this is the time to re-engineer the way its products and services are packaged, delivered, and priced to the financial market. Tune in for the next installment.

The Daily Beast describes (in apocalyptic terms) Bloomberg’s Plan for World Domination. The Law Librarian Blog suggest that Bloomberg’s hunger for content makes Reed Elsevier’s Lexis product the likely target for a Bloomberg acquisition.

Anyone think that antitrust might constrain concentration in these sectors of the information industry?


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