Has Barnes & Noble found its savior(s)?
When the news broke last Friday that Barnes & Noble had agreed to be acquired by hedge fund Elliott Management for $475 million in cash plus the assumption of another $200 million+ in debt, it appeared as though the struggling bookstore retailer was set to begin the next — hopefully not last — chapter in its history.
Now, however, another party has become part of the story. The book distributor, Readerlink, is seeking to raise financing to make its own bid for Barnes & Noble. Readerlink, which distributes books to retailers including Target and Walmart, was involved in the auction process for Barnes & Noble going back to October. It is planning to offer its own bid for the bookseller in advance of a deadline set for June 13, according to a Wall Street Journal report.
Elliott Management, which will receive up to $4 million if Barnes & Noble pulls out of the deal tomorrow ($17.5 million if after that date), is not new to book retailing. The hedge fund owns Waterstones, a U.K.-based chain with 293 locations. If it ultimately succeeds in acquiring Barnes & Noble, Elliott plans to have James Daunt, CEO of Waterstones, lead both businesses.
“Physical bookstores the world over face fearsome challenges from online and digital,” said Mr. Daunt in a press release issued last week. “We meet these with investment and with all the more confidence for being able to draw on the unrivalled bookselling skills of these two great companies. As a place in which to choose a book, and for the sheer pleasure of visiting, we know that a good bookstore has no equal.”
- Barnes & Noble to Be Acquired by Elliott, Owner of Waterstones, Bringing Together the Leading Booksellers in the US and the UK – Barnes & Noble, Inc.
- Elliott Management to Buy Barnes & Noble in $475 Million Deal – The Wall Street Journal
- Readerlink Works Toward Higher Offer for Barnes & Noble – The Wall Street Journal
DISCUSSION QUESTIONS: Would Barnes & Noble under the ownership of either Elliott or Readerlink be more likely to succeed than under current management? What changes would you expect new management to make at Barnes & Noble?
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17 Comments on "Has Barnes & Noble found its savior(s)?"
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Senior Vice President Marketing, PDI
Under the ownership of Readerlink, Barnes & Noble is integrated into the supply chain, thereby minimizing overhead and maximizing margin. In theory, this will be better for the bottom line. As an eternal optimist and bookstore lover, I am hopeful in the idea that Elliott wants to make Barnes & Noble a destination. Cultural hubs are the evolution/store-of-the-future, so they have the right vision.
If Readerlink acquires Barnes & Noble, I think the store will become more streamlined and mechanized. If Elliott acquires, I expect we will see Barnes & Noble transform into the destinations Daunt envisions. I’m excited to see either opportunity play out for Barnes & Noble.
Chief Executive Officer, The TSi Company
Founding Partner, Merchandising Metrics
It’s interesting that a hedge fund, any hedge fund, considers a book store a good investment in this day and age. Like any investment, it’s an “eye of the beholder” context. Current value versus perceived potential value. If Waterstones is providing all the right lessons, then that expertise may be highly leveragable in creating an evolved future for B&N.
Senior Vice President Marketing, PDI
This is what I keep coming back to, Jeff. It’s a seemingly unlikely investment strategy for a hedge fund. Definitely will be interesting to watch it play out.
Retail Strategy - UST Global
B&N’s savior would be the customer if they can sell goods and services that the customer wants to buy. Ownership (new or other) needs to figure that one out. Big Box bookstores are a tough game, although Indigo Books (until recent quarters) seemed to have figured out how to operate this format. I read books exclusively on a tablet, but if I could have the experience of wandering through a physical store for shopping titles, and pointing and clicking to buy, I’d be all in. Seems the right combination of browse in-store, buy in-store, deliver online, (without even a shipping delay) or see now, buy now just isn’t quite there.
Strategy & Operations Delivery Leader
President, Spieckerman Retail
Readerlink would seem to be the better play as the company understands the book business and the brand potential. On the other side, private equity ownership will be a far more distant and tactical play. Either way, you gotta love that the potential PE guy is called “Daunt.” Hopefully not a harbinger but perhaps apt!
President, founder and CEO Interactive Edge
I believe Lenny Riggio when he says he believes the new owner and new CEO will have the best chance to make Barnes & Noble a huge success again. I worked at the ad agency that had his account for many years and he is a great guy and a true visionary. Given the realities of the book selling business, Lenny has been able to withstand and mostly thrive in a very tough business.
I don’t know if the new owners will be able to pull this off, but I do know that Lenny would not hand over the keys to just anyone, I believe he truly feels that Elliot Management has the best chance of success. I hope they succeed, as bookstores are great, and Barnes & Noble are among the best. Nothing will replace a good bookstore, and in fact, airports need more real bookstores, and not just another Hudson with small selections.
Founder and CEO, CrunchGrowth Revenue Acceleration Agency
I certainly believe B&N would be better served by someone in the book industry. We have already seen the effects of the PE consolidation of an industry. I think there would be another Toys “R” Us debacle if B&N chose a fund over a book distributor.
Founder | CEO, Female Brain Ai & Prefeye - Preference Science Technologies Inc.
Libraries and good bookstores, a reader’s dream. Unfortunately, shopping Barnes & Noble is a lackluster experience. The presentation lacks inspiration, a hodgepodge of books, shelved in curious ways — as opposed to the dynamic real-world experience of shopping Amazon bookstores.
Whoever buys Barnes & Noble will need to reinvent Barnes & Noble, taking a cue from Amazon. Otherwise, it will still be the same lackluster experience, under new management. Ask a bibliophile, would you rather have more Amazon bookstores or Barnes & Noble bookstores.
Director, Retail Market Insights, Aptos
While I would normally be very suspicious that a hedge fund would be good for any business needing an infusion of capital to reinvent themselves in order to become relevant to consumers, I have to admit Elliot intrigues me. Their plans to install the Waterstones CEO is encouraging news, as Waterstones seems to have successfully integrated culture and community into their model. Readerlink feels much more like an efficiency and margin play, which will do nothing to solve B&N’s relevance problem.
Principal, Retailing In Focus LLC
Like many other panelists, I’m concerned when I read “hedge fund” and “assumption of another $200 million+ in debt.” The retail graveyard is filled with well-known brands that have fallen victim to excessive debt loads and their own dated business practices.
Nor to suggest that a brick-and-mortar bookseller like B&N has no place in the world, but any number of turnaround strategies haven’t worked for years. Saddling a struggling retail model with more debt doesn’t sound like a recipe for success.
CEO, The Customer Service Rainmaker, Rainmaker Solutions
An interesting strategy is at play here when a hedge fund buys B&N. I am sure there is a strategy, but we will all have to wait and see. Sure, the bottom line will look better with the consolidation of operations. But how do they plan to get more people buying rather than browsing? I am a book lover and always enjoy going in and browsing through the favorites. I hope they have the solution.
President, Sageberry Consulting/Senior Forbes Contributor
I’ll weigh in with a decisive “maybe.” The good news is their potential new owners have some synergy to bring to the table. That will be helpful but certainly not enough by itself. Barnes & Noble needs to do a better job executing against the blur that is retail today by delivering a more harmonious experience. They need to make their stores more memorable by providing new, unique, customer relevant experiences in store. They need to better leverage customer data to create a more personalized experience. And on and on.
The other issue is that their stores are generally way over-spaced for what they do today. Whether the answer will be to selectively add new related items to sell (a la Indigo) and/or add more theatre to the store is hard to say without more data. But unless they can grow their trade area penetration (in store and online) markedly much of their real estate will not make sense over the longer-term.
Head of Trends, Insider Trends
I think everyone is thinking the same thing when they see “hedge fund” in the context of Barnes & Noble. However, Waterstones is doing well at present (three years of profits) and holding up against the likes of Amazon and other online alternatives. Whether that will remain the case is of course not guaranteed, but I do think the company has some good thinking (more events/reasons to visit the store, staff, differentiation between locations). So if they were to apply the same approach to Barnes & Noble you could be quietly optimistic about its chances.
At the same time, Readerlink would bring the brand closer to the supply chain which could benefit in other ways. I think this will be a case of two different approaches, but to have a chance of success they need to tap into what makes someone go to a bookstore and enhance that.
Managing Partner Cambridge Retail Advisors
Readerlink appears to be a better fit for successfully turning around the Barnes & Noble brand. With bookselling experience and a vertically integrated distribution network, Readerlink may be better positioned to drive some costs out of the business or generate more cumulative revenue between the two companies.
Whoever becomes the new owner will have significant challenges. The book industry was forever changed by Amazon and has experienced significant casualties (e.g., Borders Group). Changes will need to address new shopping journeys and the experiences consumers now expect. Good luck to whoever “wins” this deal.
CFO, Weisner Steel
“What are they thinking?” is probably what most people are thinking about this. Suffice it to say Elliott is known for many things, but none of them particularly pointed toward this acquisition.
But whatever … I don’t think any of B&N’s problems were related to their management — indeed, that they’re still around while most of their competitors are not suggests management was good — and the challenges of operating in not one but two struggling environments (physical retail and books) will only grow.