Private Equity Passes The Baton

Talk about robbing Peter to pay Paul.

BC Partners, a large London-based private equity firm, has identified an unusual buyer for one of its largest portfolio companies: itself.

The Story

The private equity playbook is not overly-complex: raise capital from outside investors, acquire businesses and implement improvements, then divest (hopefully) at a premium.

BC Partners acquired academic publisher Springer Science for €3.3 billion in 2013. The business was then merged with Holtzbrinck’s Publishing Group, the owner of the prestigious Nature journal, to form one of the world’s foremost academic publishing units.

But after three failed attempts at an IPO, BC Partners has reportedly determined it needs more time to maximize the value of its investment.

The News: According to the Financial Times, BC Partners will set up a new fund specifically designed for the purpose of buying out its own stake in Springer Nature. BC Partners will invest in the fund alongside new outside investors.

No Other Takers?

The academic publishing business is extremely lucrative.

Unlike many other types of publishers that create their own content, the papers published in a scientific journal are produced by third-parties (scientists, researchers, etc.). And instead of getting paid to include their content in the journal, researchers actually pay to have their papers included.

Publishers then charge academic institutions hundreds of thousands, or even millions of dollars, for subscription access to all the content published by a journal.

Disruption: In recent years, academic institutions have been pushing back on this model in favor of a shift to an “open-access” framework where content is free to consume:

  • Institutions including MIT and UNC have broken off ties with the world’s largest scientific publisher, Elsevier, after failing to reach a deal to increase open access.
  • Earlier this year the University of California and Springer Nature announced a landmark deal to make articles written by the institution open-source.

The Takeaway

For BC Partners, the disruption to its industry has made it difficult to exit the investment in Springer Nature. For now, it appears it will remain in-house.

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