Every man who's jumped into a cold ocean knows about shrinkage.
Look at Barry O'Callaghan.
He took Riverdeep and dove into the warm waters of leveraged financing, gobbling up whales like Houghton Mifflin and Harcourt Brace, until he fashioned a publishing behemoth that become Education Media and Publishing Group HMH Riverdeep Greenwood etc., etc. etc.
Then he swam along, struggling to stay afloat under a crushing weight of debt piled on debt.
The waters turned cold.
State boards of education found that their budgets were being cut in the face of a global financial decline, powered in large part by excessive amounts of debt taken on by home buyers, bankers and governments.
Thus began the shrinkage.
The little minnow that swallowed publishing whales finally choked to death, a demise long predicted by bean counters who simply didn't find enough beans in the pot to feed a large beast.
As part of its Chapter 11 bankruptcy filing, what is left of Mr. O'Callaghan's creation listed its assets and debits. HMH, which began its existence as a whale, has become more like a minnow.
Granted, textbook sales have not improved in the past few years, and sales forecasts are not rosy. There still is no money to be found in states strapped to meet the basic needs of the citizens.
What effect might you expect in light of all those synergies that Mr. O'Callaghan realized?
To cut costs, employees were given the sack (sorry, that would be synergies) and those who remained had to do more than one job. Reducing the labor force will eventually take its toll, and the bankruptcy court is putting all that shrinkage on display.
There's only so much one person can do in a work day. Which means there's so much that doesn't get done. A company not doing does not grow. Add in declining demand, and you have an over-sized company that has already pared costs beyond the bone.
Then there was the debt---a massive pile of debt that sucked the life blood out of a firm that could not possibly generate enough capital to meet the demand, even with all those synergies running loose.
The minnow swallowed the whale and died. After the bones are picked over in bankruptcy court, what remains might be sold in bits and pieces.
So you think you're a well-endowed financial guru who earned his chops at Credit Suisse? Cold water always causes shrinkage.