In the past few weeks several companies in the library technology industry have announced ownership changes. This recent wave involves mid-sized companies, including some active mostly outside the United States.
Although the corporate giants naturally attract the most attention, it is important to keep in mind the small and midsized companies that also provide technology products to libraries. This tier of companies tends to serve libraries within a limited geographical region and have a more focused portfolio of products. The library technology industry comprises an interesting mix of companies with many different business models, including nonprofits as well as for-profits, ranging in revenue from the billions to the low millions. In addition to the wellknown global companies, many others operate within specific countries or regions. Each of these companies contributes to the state of the art of library technologies and plays some role in the competitive dynamics that influence the products and services available to libraries.
The business changes in the mid-level companies also must be seen in the context of what is happening with the large-scale companies in the industry. The consolidation of Ex Libris and Innovative into ProQuest and the pending acquisition of Pro- Quest into Clarivate represent as much economic power as all the mid-sized and small companies combined. On a related note, on August 9, 2021, Clarivate announced that the close of the deal has been delayed due to the need to provide the Federal Trade Commission additional documentation regarding the antitrust review it performs for all large acquisitions. The expected date for the closing was delayed until the end of December 2021, with possible extension through April 2022. Some adjustments in the financing were needed given the scale of the $5.3 billion transaction.
Five additional ownership changes to library technology companies (Table 1) have been announced subsequent to the massive Clarivate acquisition. Each of these events has its own background story, with a common thread of companies moving toward a stable long-term position. This group of companies each began as entrepreneurial projects to develop and commercialize a particular product or service for libraries. Many companies operate under the ownership and management of their founders for a long period. Insight Informatics began in 1985, and Baratz in 1987.
It is rare for founder-owned businesses to be passed on through family members, though Follett and EBSCO are important examples of family-owned businesses spanning multiple generations.
For companies privately owned by their founders, there will almost always be a transition to new owners. In the library sector, businesses tend to be more influenced by values and customers' interests than seen in the commercial business-to-business sector. The current investment environment usually provides multiple options for business acquisitions. As the founders of these companies look to sell, they may give higher consideration to buyers most committed to building on their product visions and sustaining relationships with library customers.
|Table 1. Recent library technology acquisitions|
|Company||Founded||Founder / Owner||Buyer / status||BiblioLabs||2006||Robert Holt, Mitchell Davis, and Andrew Roskill||LYRASIS (nonprofit)|
|Kanopy||2008||Olivia Humphrey (owned by L Squared Capital Partners from 2018 through 2021)||OverDrive (owned by KKR)|
|EnvisionWare||1998||Mike Monk||Volaris / Constellation Software, Inc. (public company)|
|LIBERO||1985||Sam Pantane||Knosys (public company)|
|Baratz||1987||Juan Beitia||TSC / Constellation Software, Inc. (public company)|
All five business changes in this round involved strategic acquisitions by existing businesses able to integrate the products into their product portfolios. These permanent arrangements contrast with that of private equity buy-outs where the company will likely be sold again within a relatively short interval.
This round of business transitions diminishes the number of companies in the library technology industry owned and operated by their founders. Several others remain, including The Library Corporation, Book Systems, Biblionix, ByWater Solutions, PTFS, Soutron Global, and TIND. As noted, companies can operate under the management and ownership of their founders for a long time, often spanning multiple decades. While no further business changes are necessarily expected in the short term, libraries should anticipate eventual changes.
The history of the library technology industry also demonstrates that changes in the ownership status do not necessarily have a negative impact on the products and services involved. Though some have faltered at first, in many cases new owners have proven to be responsible custodians of the products and have retained the satisfaction of their library customers.
In assessing the impact of a business transition, key concerns focus on whether the new owners show interest in making the necessary investments for ambitious development and improved support and how attunded the organization might be to the needs of its library customers. Those organizations already providing other types of products and services to libraries can be well positioned to take on the development and support of new technology products. As the products of small or mid-sized companies are acquired by large organizations, they may gain access to greater development and support capacity than was present in the incumbent organization.
Libraries are naturally alarmed when the company upon which they rely for critical technology products goes through a business transition. Library companies tend to be stable, with long business cycles, but few will ultimately remain untouched by changes. Optimistically, these changes should not disrupt libraries that rely on the products involved, and a path will be paved for stronger products in the longer term. Based on the recent history of the industry, the disruptions have been minimal—very few products have been discontinued because of mergers and acquisitions, though some have been demoted to legacy status. Legacy products tend to endure even beyond the point where their technology underpinnings are obsolete. Business transitions and industry consolidation have narrowed the field of options as libraries seek new technology solutions, though the products available today may be stronger than in previous times. While a dynamic industry with continual business transitions raises concerns, a static group of companies unchallenged by change would likely mean less progress in the creation of the technologies needed to support libraries as they evolve in their strategic missions.