Monday, June 21, 2010

What's happening with Thomas Nelson?

By now you have probably heard that the largest Christian publisher has been bought by Kohlberg & Company. This transaction raises questions about the future of Christian publishing. I don’t know that anyone has the answers, but it’s still worthwhile to look at this transaction to gain a better understanding of how the publishing industry works.

One of the first things to look at is the purchasing company. Kohlberg & Company is a private equity firm. In other words, they make money by buying and selling companies. According to their website, they focus on “middle market” companies with values between $100 and $500 million. They make money by implementing changes that increase revenue and cash flow, giving the company more value in the eyes of investors, and selling the company, either to another company or in the form of stock. They aren’t publishing experts by any stretch of the imagination, so it should come as no surprise that Michael Hyatt is still at the helm of Thomas Nelson. What Kohlberg & Company brings to the table is money and a desire to see that money put to good use.

If the figures I’ve seen are correct, Kohlberg & Company paid $219 million in debt that Thomas Nelson had accumulated. For some companies, that is about what the weekly payroll is, but when you’re looking at a company the size of Thomas Nelson with about 500 employees that number is huge. At 6 percent, the company would be paying out over $13 million annually in interest alone. I suspect that it is that figure that has helped to persuade Kohlberg & Company that Thomas Nelson is a good investment for them. From all appearances, Thomas Nelson is a good solid company with one problem; they are swamped with debt. Kohlberg & Company’s gamble is that if they can eliminate the debt and instead use that $13 million to invest in new products the company will be able to make more money.

That sounds like a good thing for authors. Thomas Nelson will have more money to invest, so they may be looking for more authors. While that is partly true, don’t get your hopes up just yet. Acquiring manuscripts is part of how Thomas Nelson got in debt in the first place. Even so, with the debt gone, the company has up to $13 million dollars they can spend each year and would still be better off than before. With that kind of money to invest, it wouldn’t surprise me to see Thomas Nelson either buying smaller publisher or persuading a few well known authors at some of these other publishers to jump ship and publish with Thomas Nelson.

Of course, there may be some products that we’ll see Thomas Nelson either drop or sell. Considering how many people Thomas Nelson has laid off in an effort to stay afloat, I doubt there are many pet projects out there that just aren’t cutting it, but there’s always the possibility in these situations.

Sometime in the future, the day will come when Kohlberg & Company will be ready to sell Thomas Nelson. We have no way of knowing what form that will take. So all we can do is watch this situation and see what develops.