Friday, August 08, 2014

A Done Deal Comes Undone

The deal was announced to much excitement, particularly in light of the Hachette/Amazon brawl. Perseus Books Group was going to divide itself into two pieces, with onef going to Hachette to improve that publisher's backlist, and the other part going to Ingram so that the distributor would become big. Really big.

Things are not always so easy in the execution.

Hachette stood to gain, with the addition of Perseus' non-fiction titles giving the expanded publisher a stronger position in its ongoing fight with Amazon. Perseus' executives knew that, of course. They would have played on that fact and used it as leverage to lift the sale price.

The same applies to Ingram, an already large distributor looking to grow. Good for Ingram, but should Hachette then expect a discount for the loss of the distribution arm of Perseus Books? Was there a flicker of loyalty to Mark Suchomel, the founder of a Perseus boutique distribution line? Ingram was quick to declare that he would be leaving the company as soon as it became a branch of Ingram. How about a little something, Ingram, for the effort? Did the price of a golden parachute sink the deal?

The three-way deal became unwieldy as negotiations over who would pay what for which did not proceed with the same smoothness as the initial announcement. It all sounded good on paper. Once the parties talked money, however, real money, the consensus was lost and for want of consensus the deal was lost.

From comments made by Perseus CEO David Steinberg, the company will simply move forward and consider the failed deal as just that, a deal that didn't happen in a business climate where plans are floated all the time and don't necessarily amount to anything.

Someone else will come along, especially now that it is known that Perseus is willing to entertain suitors. Some other publisher will make an offer, or some hedge fund perhaps, and a different deal will be struck and negotiated and agreed.

What will become of the distribution arm of Perseus? Ingram may still be interested. It will simply be a matter of locking horns with a different nemesis and wrangling the best price that makes sense for Ingram and is acceptable to Perseus. Next time, maybe they could see their way to keeping Mr. Suchomel on for a limited time, or send him away with a lovely parting gift.

As for Hachette, there is no reason to expect that the embattled publisher is going to retreat, not when strategy calls for a firmer non-fiction list. They can go out shopping and find another publisher willing to sell a piece of itself, some entity located in the United States where Hachette wishes to expand. Hachette needs to be bigger to win its fight against Amazon. The publisher needs a backlist as protection against Amazon's manipulation of the frontlist market.

This deal is undone, the victim of hard negotiating and Perseus' lack of urgency in selling.

The deal-making, however, will continue.

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