In a move that caught most of the library world by surprise, on Oct. 6, 2015, ProQuest announced its intention to acquire Israel-based Ex Libris Group from private equity company Golden Gate Capital. The acquisition should close in a few months, when the requisite reviews and sign-offs are completed. ProQuest will then form a separate business unit named Ex Libris, a ProQuest Co. Until the deal closes, the companies will continue to operate independently.
Matti Shem-Tov, currently Ex Libris Group’s president and CEO, will head the new unit and report to ProQuest CEO Kurt Sanford. Obvious synchronicities exist between Ex Libris Group’s products and those of Seattle-based ProQuest Workflow Solutions. Thus, the new business unit will be supported by both entities. John “JG” Chirapurath, SVP and general manager of Workflow Solutions, will still report to Sanford but is expected to take on product and strategy roles after the acquisition closes. The exact arrangement between Ex Libris Group and Workflow Solutions will take shape in the future, but it would not be surprising to see them align to concentrate on library back-office operations while other ProQuest units focus on content.
In a conversation with Information Today, Inc. editors, Sanford declined to disclose the purchase price of Ex Libris Group, but Israeli press reports pegged it at $500 million. This would be a significant increase from the estimated $250–$300 million that Golden Gate Capital paid to acquire Ex Libris Group (which began as a project at Hebrew University of Jerusalem in 1980) from another private equity company, Leeds Equity Partners, LLC, in 2012. Leeds bought Ex Libris Group in 2008 for $150 million from Francisco Partners, which had paid $62 million in 2006 for the company. Sanford also indicated that he’d had his eye on Ex Libris Group for several years, most likely around the time Golden Gate Capital bought it.
The ever-growing price tag reflects, in part, the nature of private equity investments. Richard P. Hulser, chief librarian at the Natural History Museum of Los Angeles County, described the role of private equity in library supplier companies in an article in the November/December 2014 issue of Online Searcher (“Private Equity’s Effect on Information Professionals and Their Institutions”). Private equity companies are eager for short-term gains. They generally don’t hold on to a property for very long—they want to cash out—which is certainly borne out by Ex Libris Group’s private equity ownership statistics. Sanford contrasted these statistics with ProQuest, which is a privately held, family-owned business. ProQuest takes a long-term view of its investments.
Hulser says he was “astounded” by the Ex Libris Group announcement and, from a customer perspective, doesn’t think much will be very different in the first year of operation. “I think they’re buying market share,” he notes, and says he’s pleased with the apparent recognition that libraries, including his, still manage print as well as digital collections.
The financial aspects of the acquisition, however, caught the eye of Moody’s Investors Service, which, on Oct. 8, 2015, placed two ProQuest Senior Secured first liens as well as its Corporate Family Rating, Probability of Default Rating, and Outlook on review for possible downgrade. ProQuest’s ratings were already judged as speculative by Moody’s (Ba2 and B2), but even a downgrade wouldn’t put it in the most risky category. If the strategic benefits of the acquisition outweigh the risks, Moody’s doesn’t see a problem. Note, too, that this is only a “possible” downgrade and would affect ProQuest’s potential future borrowing ability, not its customer relationships.
Ex Libris Group is a well-established company in the library automation sector, and it offers ILSs (Aleph and Voyager); products for discovery (Primo), library workflow management (Alma and bX), and digital management and preservation (Rosetta); and a newly introduced product for course reading list management (Leganto). ProQuest’s product line is broader, but it has a discovery service (Summon) that competes with Primo and a workflow management tool (Intota) that competes with Alma. Its other products, such as Dialog and its research platform, digitization initiatives, and ebook offerings have no Ex Libris Group analogues.
Singapore Management University’s library converted to Ex Libris Group’s Alma and Primo in August 2015. As very recent Ex Libris Group customers, the librarians find the news of the acquisition “promising” and think it could help libraries create a “seamless 360 degree user experience.” However, they expressed some concerns about content neutrality.
Consolidation and Expansion
The acquisition will result in both consolidation and expansion. Libraries that are looking for a discovery service now have one fewer vendor from which to choose, with the market reduced to ProQuest, EBSCO Information Services, and OCLC. Not every library needs a discovery service, but all libraries need some type of automation of library management functions. With this acquisition, ProQuest and Ex Libris Group customers will have more products to select from. It’s also likely that libraries will begin receiving calls from other companies, particularly ILS vendors, urging them to jump ship. It might also present opportunities for open source companies to lure customers away from the “big three.”