Trade publishing 'an opportunity for private investors', Frankfurt hears

Trade publishing 'an opportunity for private investors', Frankfurt hears

Trade publishing represents a "counter intuitive" opportunity for private investors, at a time when publicly-quoted publishers will need to make investments that their shareholders might not be able to stomach.

This was the view of Brian Napack, formerly president of Macmillan USA turned private investor at Providence Equity Partners, who was interviewed at Publishers Launch by journalist Michael Cader. Napack's comments were made as Phaidon announced its sale to private equity billionaire Leon D Black for an undisclosed sum.

Napack said that markets went through cycles, but added that investors should look for places where there was "fundamental consumer demand", adding that this customer "demand in the consumer book business has been stable for some time". Napack said: "An investor might ask, why are these companies not making more money out of the opportunities?"

But Napack warned that publicly-owned publishers could struggle to gain the time needed to make the investments necessary to take advantage of the industry changes. "It is hard to make an argument that publishing companies should be publicly-owned. I believe publishing companies need to invest in a bunch of things, which won't have a week or a month, or even a year-on-year return. The amount of over investment you have to do is significant, and your debt holders or public stock holders might not be too happy with that."

Napack cited Macmillan's investment in its sci-fi brand Tor. "It took us five years to build Tor.com, and it would have been difficult to invest in that if we were a publicly owned company. The time horizon for investment would have been unpalatable."

Napack said investors would be looking for publishers with a big backlist, where they owned the rights to be able to leverage the assets. With that in mind, Napack advised that publishers "take a broader perspective over rights" they acquire. "All of you publishers are creating value that is being exploited by many others."