Flightless Birds And The Synergies They Realize

A few years back, Barry O'Callaghan merged a few publishers into a big whale of a firm that is currently struggling to hold itself above water.

He took on an ocean of debt, believing that he could cut costs to such an extent that the merger would pay for itself.

What he called "realizing synergies" as departments were combined was a code word for cutting the work force.

A lot of people were given the sack, while those left were under pressure to do the work of 1.5 or 2 employees to compensate.

Both Pearson's Penguin division and Bertelsmann's Random House are officially courting, with a plan to unite their publishing units into something that will be more successful than their individual entities.

Pearson knows all about the debacle that was O'Callaghan's combination of Riverside, Houghton Mifflin, and Harcourt and a few other little minnow publishers. Like the newly created Educational Media and Publishing Group, Pearson is heavy into educational publishing.

The idea of buying up Random House outright would have been viewed through the HMH-Riverside-et al. prism, with the nightmare of unserviceable debt hanging over discussions. As for Pearson selling Penguin, the publishing firm is too large to be appetizing in the current economic climate.

Penguin and Random House would be combined in a 50:50 deal that would create a trade publishing entity owning about 20% of the market. Some predict it could extend its reach to control 40% of the market.

Assuming the deal passes muster with the anti-monopolists in the U.S. Justice Department, that is.

And if it does, what of the two sales forces, the two accounting departments, the two marketing departments, the two of everything else?

Penguin and Random House will realize synergies.

People will lose jobs.

Perhaps it's necessary to keep the publishers alive, to streamline operations and shrink back from their bulk gained in the fat years when people bought more books.Until the two owners reach some sort of agreement on how they'll combine the publishing units, it's impossible to say how many synergies they'll be wanting to realize to make the deal work for the stockholders.