Changes of ownership always come with uncertainty, but there’s an interesting question mark hanging over the recent announcement that the UK’s dominant bookstore chain, Waterstones, has been bought and financed by the New York–based hedge fund Elliott Advisors. The chain’s former majority stakeholder was Russian oligarch Alexander Mamut.
The news wasn’t unexpected. Although the terms haven’t been released, Michael Cader at Publishers Lunch writes (paywall) that the transaction “likely includes either the assumption or repayment of Waterstones’ debt of between £83 million and £139 million [between US$112.9 million and US$189.1 million].”
Many UK colleagues have been quick to cheer the news that CEO James Daunt is to stay on. Daunt has been seen as the force who brought the once-imperiled chain back to profitability since he took the reins in 2011, when Mamut bought the chain for a reported £53 million (US$72.1 million). Despite the levels of debt Cader mentions, the company reached profitability in 2016 and has been expanding to new locations, its 2017 sales coming in at a reported £404 million (US$549.7 million). When Daunt arrived, the company was going in the wrong direction, with annual losses of £32 million (US$43.5 million).
So the happy consensus is that a Dauntless Waterstones has been fortuitously avoided. Major players in the UK industry have stepped forward to say how pleased they are that Daunt is to stay on and run the show. For example, Hachette UK chief David Shelley is quoted by the Bookseller team, saying, “They [James Daunt and his team] have done such an exceptional job over the last seven years at turning the chain around and making it one of the finest bookselling chains in the world.”
Nevertheless, while we understand the applause for what looks like a relatively stable conclusion to a six-month worry (the fact that a sale would occur had been known since October), we’re interested in some of the more cautiously optimistic voices, especially in the always-astute agent corps.
Jonny Geller, Curtis Brown managing director and perhaps London’s most accomplished literary agent, tweeted, “Private Equity firm buys majority stake in Waterstones. No mention of future plans or vision, so let’s hope it doesn’t mean closing of more bookshops in this country. Waterstones is our only high street chain devoted to selling books—long may it remain so.” Another agent, Piers Blofeld, tells the Bookseller (paywall), “It’s a tricky one to judge … you fear the new owners will be interested in asset stripping or in Waterstones’ property portfolio,” while agent Julia Silk points out, “We’ve seen people remain CEO for a few months to keep everything stable so that people don’t panic and then not be on board three or six months later. So who knows; we only know what we’ve been told, really.”
And at City A.M., Oliver Gill writes about the “curious sale” to a hedge fund “best known for buying stakes in some of the world’s biggest companies and agitating for change.” Elliott is known as an “activist investor”—the type that tends to buy a company and work to change it.
Daunt’s own comments are both reassuring and potentially concerning. He’s on record saying, “I don’t think the core strategy will change, because it proved to be quite successful,” but also, “Once they get the keys, they will do what they want. They own the business. But my assumption is we are to carry on and they want us to keep making the business more profitable and keep on growing it. We’ve been opening up quite a lot of shops; a bit more capital will allow us to do that quicker.”
Bottom line: In most cases of acquisition, the original commentary from those involved is meant to calm other investors, consumers, and the workforce. “Not going to change a thing” rarely proves true. We think that the Bookseller’s Philip Jones is right to bring the concerns into the daylight, writing (paywall), “Informed observers are clear that Elliott could turn out to be a very demanding parent—eager to see a cash return on its investment.” And it’s not as if Waterstones, itself, was on entirely solid ground. Writes Jones, “Its stores require more refurbishment … its staff incentivising, its website overhauling, and its push into related products realizing.” The story isn’t over, in other words. We think a hopeful but watchful stance makes the most sense for the high street for the next year.
Jane Friedman has spent her entire career working in the publishing industry, with a focus on business reporting and author education. Established in 2015, her newsletter The Bottom Line provides nuanced market intelligence to thousands of authors and industry professionals; in 2023, she was named Publishing Commentator of the Year by Digital Book World.
Jane’s expertise regularly features in major media outlets such as The New York Times, The Atlantic, NPR, The Today Show, Wired, The Guardian, Fox News, and BBC. Her book, The Business of Being a Writer, Second Edition (The University of Chicago Press), is used as a classroom text by many writing and publishing degree programs. She reaches thousands through speaking engagements and workshops at diverse venues worldwide, including NYU’s Advanced Publishing Institute, Frankfurt Book Fair, and numerous MFA programs.
