In the past 30 years, Waterstones has changed ownership three times; wholesaler Bertrams twice. It is hard to say if they benefited from it: Waterstones did well under W H Smith in its early years, but was less happy as it matured within the HMV Group; Bertrams was caught up in the collapse of Woolworths before it was rescued by the Connect Group. That both need to find new parents again will raise concern, but neither look like unruly charges.
Although its situation is complex, the sale of Waterstones is easier to read. Russian oligarch Alexander Mamut rescued the chain in 2011 for £53m when the business had reached its nadir and the market for bookselling was haemorrhaging sales to the internet and e-readers. Without Mamut, it is questionable if the chain would have survived: HMV was also saved - but by restructure specialist Hilco, and six years on is now around half the size it was. Waterstones trades from fewer shops, with sales around four-fifths what they once were, but under m.d. James Daunt it is growing again.
Daunt has said that if Mamut can find a buyer, it is a sensible move to sell. Even more so if he realises the £250m price floated by Rothschild, the corporate financier brought in to secure new UK-based loans for the chain and to explore a sale, in the Sunday Times. By the time Daunt and his management team begin their beauty parades in front of potential buyers, the business will have close to three years’ worth of improved performance to talk about, with its top line up, and profit margins of 10%. Any buyer will want to keep Daunt and his management team: meaning the chain is unlikely to be sold to a suitor that this squad is unhappy about - ruling out, if it was ever really in, Amazon. For Daunt, the prize is obvious: a committed owner, based close to home, with a medium-term growth strategy and a long-term exit plan that would most likely see the chain floated on the Stock Exchange.
Under its likeable m.d. Justin Adams, Bertrams (now Connect Books) is similarly improving, benefiting from a strengthening home market, with its Achilles’ heel the struggling - but small - library business. Nevertheless, valued in its accounts by Connect at just £15m, the asking price could be attractive enough to warrant consideration from US giants such as Ingram and Baker & Taylor - who will see the advantage of having a bigger UK base at a time when sterling’s recent devaluation has made the UK a good source for books - as well as private equity.
Book businesses tend to do well when they have parents patient enough to ride out the market’s vicissitudes and wise enough not to take too much from them in the good times. Unusually, this time around neither Waterstones nor Bertrams need rescuing, just nurturing.
Philip Jones is editor of The Bookseller.