In the days when everyone did everything, few people did everything well. But I loved it. Editors in magazine companies moved from the Meat Trade Journal to the Retail Jeweller in a moment. I myself was transmogrified in a 3 line memo from running educational publishing to leading the charge in building a law publishing empire. We were in Publishing, we were Men (sadly, mostly) for All Seasons. “These are just businesses” we used to say. “You don’t need to be a lawyer to run publishing for lawyers”. And part of me still believes that, except nothing can now forgive how arrogantly little we knew about the needs and behaviour of the good people buying our publications.

These thoughts came to mind two weeks ago while reading this press release: “The company plans to complete its portfolio rationalization by exploring strategic alternatives for McGraw-Hill Construction, a leading provider of essential data, news and insights to better inform construction professionals’ decisions in the United States. McGraw Hill Construction has approximately $170 million in annual revenue and stand-alone operating margins approaching 20%. The business has shifted away from legacy print products to new, innovative data and analytics offerings, which are generating double-digit growth. Evercore Partners is acting as a financial advisor to the Company in this matter” (www.biia.com). It reminded me why we built these curious portfolio companies in B2B in the first place, as well as confirming my view that most press releases mean the opposite of what they say (“complete” in the context of the above note must be taken in the context of a complete review having broken the corporation into two and divested Education!).

We reached this place through a long experience of periodic recessions – at least that has not changed. We got here because we argued that a balanced portfolio gave us assets which would not all go down at the same time, and a balance of early first-in, first-out victims, recession proof activity (that is how we saw law publishing in the 1980s!) and quick recovery vehicles would proof us against all eventualities. Add in a blend of other qualities – some selected for high growth, others for cash generation, a few for high margins and we convinced ourselves that we could really get “balance” in a portfolio. But all of those traditional craft became waterlogged in a recession which was like no other in information marketplaces. As we emerged it became clear to all but the recidivist publishers that publishing, as experienced in the previous 50 years, was just about over. When we could pry people’s compulsive attentions away from their smartphones in order to ask them what they wanted, people did not generally say “book” or “newspaper” or “magazine”. In other words we were left asking Format questions which did not satisfy answers expressed as “solutions”, or “excitement” or ” learning without teachers” or even, “answers”.

Last week I was at a European Union workshop in Luxembourg on what we are going to do about stimulating the Creative Industries in Horizon 2020, the Commission’s workplan for 2015-2020. Only the nice lady from FIPP used the word “publishing” on any of the sessions that I moderated or attended, and even then with a sort of apologetic bashfulness. So it does not surprize me that the great portfolio conglomerates built in the publishing space of yesteryear are crumbling away, but it is worth asking why, and what may replace them. Companies change mission over time – think only of Pearson, a late Victorian builder’s merchant from Yorkshire which exploded into growth as an oil explorer in Latin America before, in late cycle, using the accumulated capital to become a brand portfolio in the post – war years. Now it is a single market entity once again, with just one of its brand acquisitions, Longmans, the eighteenth century bookseller/publisher, becoming the path to a remarkable twenty-first century market leadership. This is an odd story but not an unusual one. Portfolio is part of a cycle.

So what did Pearson need when they went single market in education? Well, specialist educational expertise is part of the answer. The single market specialists do seem to have a layer of market expertise which is very different from the jack-of-all-trades tradition that I noted above. And managers can talk tech talk and know what they are saying, while technology investment has become the key marker for many. Can you put a portfolio on a single platform is the “how many angels can you get on a pinhead” question for the industry rationalist schoolmen. Truth is, I believe, that new platforms and greater data concentration and increasing semantic analysis and domain ontologies increase specialization. For the portfolio players this raises a problem of choice and investment. Sometimes the answer, and this may be the case at McGraw-Hill, is not to invest further but to dispose. You could call this the D&B Gambit, as it retreated from portfolio ownerships over the last decade onto a core specialization. Sadly the pieces it sold are now worth more than the bits it retained, which is another warning to portfolio dismantlers.

Pieces of stucco have broken off some of the best regarded frontages in the industry in recent years and gone crashing to the pavement. Think of Penton Media in the US, now mercifully under management with a new plan. The McGraw announcement along with the break-out of Axios, itself a mini-portfolio, from UBM tells me that this is speeding up. And the units going now are not unprofitable, just not investable in the holding group context. And they are going to market now because markets are receptive to this kind of M&A in a way that we have not seen since 2008. So put your head back into the portfolio dominated world of 17 April 2008, when the market leaders included UBM, Informa, McGraw-Hill, Reed Elsevier, Wolters Kluwer, and Thomson Reuters, which was created on that day. Now, tell me which players will specialize in what as the ice thaws and the Big Portfolio Break-Up begins. Answers on an email please to david@davidworlock.com.

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