Friday, April 24, 2015

The Minnow Dines Again

Thar she blows!
Has it been so long since little Riverdeep Publishing swallowed up Harcourt and Houghton Mifflin that the publishing world has forgotten the disaster that followed? The little minnow choked on those two mighty whales, and those who lost their jobs as the merger sank ever deeper will never forget those days.

The Celtic Tiger was on the prowl and there was money to be had, until suddenly there was not, and working people became synergies to be realized.

What remained of the debacle became Houghton Mifflin Harcourt, and the shrunken whale, back to minnow size, fought for life in a sea of declining sales as hard-pressed school councils cut back on purchases of educational materials. The money had dried up and there was little to be had. Competition in the educational materials publishing world grew ever more fierce. HMH struggled on, and managed to exit bankruptcy.

While the economy never came roaring back, HMH managed to turn itself around in a leaner form. Like any dieter, however, HMH has a craving that can only be satisfied by eating.

A snack for the hungry minnow
HMH is buying the Educational and Technology Services wing of Scholastic. The resurgent minnow dines again, swallowing up an entity that fits in with the current trend towards digital products in education. 

As you would expect, HMH is trumpeting the wisdom of the transaction, with the key elements of Scholastic's digital unit meshing so beautifully with HMH's existing products and sales staff. All it will take are a few synergies realized and the newly acquired unit will generate capital in abundance. The deal is good for HMH, in other words, and stockholders should be well pleased with the move. Share prices will rise, and the annual dividend can only increase.

What's not to like in this deal? It isn't anywhere near as astronomical as Barry O'Callaghan's former meals. At around $575 million, that's almost equivalent to a little bite of whale. More like a single serving, in fact. The diet is not broken. The restored minnow has learned its lesson and will not get fat and bloated again.

Those who will not like this can't-miss deal are the people who, as their colleagues at Harcourt and Houghton Mifflin before them, will come to discover just what a realized synergy is.

It is you. It is your job, especially if you work at Scholastic and someone at HMH does the same thing you do.

When you are about to be made redundant, in an environment where job creation is sluggish and jobs in publishing are not available, you don't care about the boost to HMH's bottom line. You worry about putting food on your own table while the minnow tackles a full plate.

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