Each of the companies creating products and services for libraries has its unique business history. This newsletter has chronicled the major business events that have shaped the library technology industry over recent decades. To provide background and context, most articles covering major company or product events include details of the history of the business involved. The broad trend has been toward consolidation of products and services into a small group of large businesses. Within this context, each company brings its own story, driven by influential founders and executives and contributing distinct products and services. Among these companies, we see several patterns in business development.
Almost all the companies in the industry began under the ownership and management of one or more founders. An entrepreneur with a good product idea can start a company, but it is exceptional when the founder can retain control of the company over the long term. Only a few companies in the library technology industry active now remain under founder ownership and management. The Library Corporation, founded in 1974, continues to be owned and led by Annette Murphy. Some of the smaller companies in this group include ByWater Solutions, Media Flex, LibraryWorld, Keystone Systems, and Biblionix. These companies have managed to fund their software development and operations through organic revenue without ceding equity to external investors.
Most companies, however, seek funding to accelerate their business strategies and product development. Early stage companies may attract the attention of venture capital firms. These investments tend to be modest in size and usually do not involve giving up control of the company. Some of the examples of venture capital assisting a library technology company advance to its next phase include the investments of Tamar Ventures and Walden Israel in Ex Libris (1999), the recapitalization of Sirsi Corporation by CEA Capital Partners (1999), and investments by Active Venture Partners and Telefónica Amerigo in ODILO. Venture capital firms balance the risk of investing in newer companies with the possibilities of higher returns for those that prove most successful.
Private equity investments have been a more conspicuous factor in the library technology industry. These firms invest only in well established companies with demonstrated business success, with the potential for additional growth. Private equity firms usually acquire full ownership of the companies in which they invest. These arrangements may also include acquisition of multiple companies, consolidated into a single business. Some of the major acquisitions involving private equity takeovers include: SirsiDynix acquisition by Vista Equity Partners (2006) and later by ICV Partners (2014); Innovative Interface acquisition by JMI Equity and Huntsman Gay Global Capital (2013); Francisco Partners' acquisitions of Ex Libris and Endeavor Information Systems (2006); Leeds Equity Partners acquisition of Ex Libris (2008); Golden Gate Capital acquisition of Ex Libris (2012); and One Equity Partners multiple acquisitions that assembled bibliotheca (Bibliotheca RFID Systems, Intellident, Integrated Library Group in 2011; 3M Library Systems in 2015). These examples of private equity investments contributed to industry consolidation but also funded the development of some of the seminal products used by libraries today.
Buy-outs of companies by larger players with related business interests fall into a category of strategic acquisitions. These companies may not be direct competitors, but offer products and services that may complement each other's business strategies. Examples of these types of transactions include ProQuest's acquisitions of Ex Libris (2015) and Innovative (2019), Lyngsoe Systems acquisition of P.V. Supa (2021), the acquisition of Talis (2018) and Lean Library (2018) by SAGE Publishing, and the multiple acquisitions of ILS companies by Axiell. The pending sale of ProQuest to Clarivate likewise fits within this category of strategic acquisition.
The entry into the ranks of publicly traded companies usually marks the full maturity of a business. Instead of full ownership by private equity firm, shares of these companies are traded on a public exchange. An example of a public company in the library technology industry is Data Research Associates, which was founded in 1975 by Mike Mellinger, issued an IPO in 1992, and became private again when it was acquired by Sirsi Corporation in 2001. The strategic acquisition of Pro- Quest by Clarivate makes it part of a public company. This issue of Smart Libraries Newsletter features the acquisition of ProQuest by Clarivate. The story of Ex Libris, ProQuest and Clarivate includes all these chapters: founding by an entrepreneur, Azriel Morag, early investments by venture capital, multiple rounds of private equity ownership, followed by a strategic acquisition, and shifting to become part of a public company.