Friday, January 11, 2008

The Minnow's Shout

After someone else has bought a round, it's your shout. Thus far, Davy Stockbrokers and Credit Suisse have ponied up to cover Barry O'Callaghan's tab. Now he's declared that it's his turn to buy and he's opened up his wallet.

Forty million of his own personal dollars will be invested, to help cover the cost of buying up Harcourt Education. It's a considerable portion of the $4 billion price tag, and it will have to give some reassurance to Davy's clients. Himself is buying in, they've said, and isn't your money safe in such a scheme as this? Would a man kick in that much money unless he planned to get it back later?

By merging with Harcourt, HM Riverdeep is planning to save $300 million on operations. Judging by the number of high-salaried suits that have left the Harcourt side, you'd have to agree that there is some savings to be had. Whether or not $300 million is a reachable goal remains to be seen.

Davy's clients are being told that they could double their money in two years time, what with the whale-like Education Media Publishing Group planning to turn a profit in short order. A yield of 11% by 2009 has been touted, and that's after the annual interest on the loans has been paid.

Mr. O'Callaghan's investment may not be for the long term. He could sell his shares at some point in the future and count up the profit while relaxing on a sunny beach in Spain. For now, however, his dream of an educational materials publisher has to work according to plan, or he'll stand to lose $40 million.


Anonymous said...

A yield of 11%? Hmm. I'd hope that the gains would be from increased sales; they have plenty of sales people in the combined forces. But maybe too many, at this point.

Can that much yield happen through "savings in operations," like the cuts in San Diego? Hard to see how savings counts as profits, but then, I'm not a financier.

O hAnnrachainn said...

Think of savings as reducing expenses. Since income minus expenses equals profit, you'd expect profits to climb if you reduced expenses.

Add in bigger sales and the bottom line expands like, well, like a minnow becoming a whale.

You're right about the sales force being too many. There's a limited number of sales people that are needed in any given territory. If you're the one who's not the top seller, you'd be wise to have your resume in order.

Anonymous said...

I'm not in sales, but many good people are. And the territories don't overlap completely (not even the regions) so it may be difficult to judge by the numbers. But judging by the numbers would be much fairer than choosing by perceived loyalties or the longevity of business relationships. From where I sit, that looks to be as important as anything else, if not more so.

O hAnnrachainn said...

Sales figures will take precedence, but if it comes down to a tie, the boss will go with his/her mates. Often in business it's about the relationships more than just numbers.

Anonymous said...

Here's an interesting somewhat related blog post in edbizbuzz

Peg Leg O'Sullivan said...

As I read the post, I noticed that the author bemoans the top echelon of the big publishers holding back digital education.

It should be noted that Barry O'Callaghan is at the top of the heap in this publishing firm, and he's coming from digital, not hard copy.

In which case, if all that the author says is true, O'Callaghan et al. will win the educational publishing materials turf war.

Anonymous said...

Surprised that there are no comments yet about the number of lay offs within the corporation this past Thursday.

O hAnnrachainn said...

"So, the total from Harcourt yesterday was about 40 and those are coming from IT and School. Not sure yet about finance and shared services. Apparently the same ratio was let go at Houghton. It's sad, it's exciting, it's new and hopefully we'll be able to make a difference."

I've got quite a few posts relating to HM Riverdeep Harcourt et al. The quote comes from an anonymous comment and links to "For The Troops".

Nerve-wracking days, these, when you know lay-offs are coming but you're praying it isn't you.