Wiley acquires Hindawi

[Glenn Hampson]

Hot off the press:  https://www.businesswire.com/news/home/20210105005201/en/Wiley-Announces-the-Acquisition-of-Hindawi

 

“The acquisition of Hindawi enables Wiley to move farther and faster toward our goal of meeting the world’s urgent and escalating need for new knowledge,” said Brian Napack, President and CEO, Wiley. “Hindawi is a true pioneer in the industry, empowering researchers with a fully digital, user-friendly publishing process that gets their life-changing, peer-reviewed discoveries out into the world faster and more efficiently.”

 

The addition of Hindawi’s journals doubles Wiley’s gold (pure) OA journal portfolio and will increase author retention by giving researchers more options to publish within Wiley titles. Its cutting-edge technology combined with Wiley’s innovative platforms and services will enhance the publishing experience for authors, editors, and reviewers, while expanding the platform and service offerings that Wiley provides to its network of society and publishing partners. Hindawi strengthens Wiley’s growing position in the global research industry, particularly in China – the world’s fast-growing research market.

 

“Similar to Wiley, we are driven by a mission to advance openness in research, working with researchers, publishers, institutions, and organizations to build a vibrant ecosystem that helps this global community thrive,” said Paul Peters, Hindawi’s CEO, who will continue to lead Hindawi as part of Wiley’s Research business. “With Wiley’s commitment to Hindawi and open access, we are excited to accelerate scientific discovery, collaboration, and innovation to maximize the impact of research for future generations.”

 

“We have worked hard with our partners to build one of the world's largest fully open access publishing platforms,” said Ahmed Hindawi, Hindawi’s co-founder. “The combined strengths of Hindawi and Wiley will continue to support the evolving needs of the research community in new and innovative ways.”

 

Wiley’s acquisition of Hindawi, along with its recent acquisitions of mThree, zyBooks, Madgex, and Knewton Alta, demonstrate the company’s continuing strategy to deliver innovative, tech-enabled products and services that unlock human potential by enabling the success of the world’s researchers, learners, and professionals.

 

Congratulations to both companies and good luck on the open road ahead!

 

Cheers,

 

Glenn

 

 

Glenn Hampson
Executive Director
Science Communication Institute (SCI)
Program Director
Open Scholarship Initiative (OSI)

 

 

[Abel L. Packer]

Glenn 

Happy New Year as much as possible. 

..., F1000R by T&F,...., HINDWI by Wiley... are all these acquisitions favoring or debilitating the advance of Open Access? 

Best. Abel 

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Abel L Packer

[Glenn Hampson]

You as well Abel---thank you. Well, of course, everyone is going to have a different opinions here. Joe’s counts triple since he answers questions like yours for a living. My own personal opinion, for what it’s worth, is that this particular acquisition helps on several levels---at minimum, by giving Wiley (which has big open ambitions) a bigger open footprint, and also by giving Hindawi access to systems that can help make its products better. In some cases, obviously, acquisitions are a way to drown the competition (think Microsoft and Google); in other cases, they’re a way to improve capability. I think this one is the latter. I’d be curious to hear what the experts think though.

 

Cheers,

 

Glenn

[JJE Esposito]

The battle is not between open and closed. The battle is between Wiley and its competition. If the marketplace wants open, publishers will deliver that. Wiley is very smart about acquisitions; there is likely a carefully thought-out in-house plan for this deal (and with interest rates near zero, who is to stop any company from buying another?). Wiley appears to be bulking up for its negotiations for transformative agreements. It needs more articles (quality likely takes a back seat to quantity) to compete with Springer in particular. Hindawi's Asian footprint is also of interest. I don't see that this deal is about OA at all. It's like saying that the competition between Tesla and Toyota is about who sells more red cars.

Joe Esposito

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[Abel L. Packer]

Joe, Following your reasoning,  my question points to the side effect or the consequence of the acquisitions on the progress of Open Access. We are talking about sellers of gasoline cars and sellers of electric cars. Whom sells more red cars will affect one or other market. 

Abel

Abel L Packer

[Glenn Hampson]

If I may Abel---Joe, I think the point Abel is driving at is whether Wiley (the gasoline powered car in his analogy) will show the same commitment to publishing open access as Hindawi (the electric car). This deal may not be about OA per se, but Abel is asking (I think) whether the output of OA will drop as a result---whether Wiley will convert Hindawi to gas.

 

Again, this is my $0.02, but based on my conversations with Wiley, they’re excited about an open future and are trying to position themselves to better serve the open market. So, again, it’s a win-win (whether or not this was a primary focus of the deal, it’s an important outcome).

 

Best,

 

Glenn

 

From: Joseph Esposito <espo...@gmail.com>
Sent: Tuesday, January 5, 2021 3:07 PM
To: Abel L. Packer <abel....@gmail.com>
Cc: JJE Esposito <jjoh...@gmail.com>; Glenn Hampson <gham...@nationalscience.org>; The Open Scholarship Initiative <osi20...@googlegroups.com>
Subject: Re: Wiley acquires Hindawi

 

I don't understand your point.

 

Joe

 

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Abel L Packer

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Abel L Packer

 

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[Simon Linacre]

I think the deal is both about competitiveness and OA, and in particular part of a strategic move by Wiley from market share of subscription revenues to market share of research funding and APCs. Acquiring Hindawi's share of the latter will enable it to better compete with publishers already increasing their share (ELS, SN) and ahead of others. It could also support transformative agreements, as Joe points out, which would mitigate risks as it moves away from subscriptions, while also building its offer in light of Plan S roll out.

Cheers, Simon

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From: osi20...@googlegroups.com <osi20...@googlegroups.com> on behalf of Glenn Hampson <gham...@nationalscience.org>
Sent: 06 January 2021 02:42
To: 'Joseph Esposito' <espo...@gmail.com>; 'Abel L. Packer' <abel....@gmail.com>
Cc: 'JJE Esposito' <jjoh...@gmail.com>; 'The Open Scholarship Initiative' <osi20...@googlegroups.com>
Subject: RE: Wiley acquires Hindawi

 

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[Abel L. Packer]

Thanks, Glenn, for the precise translation. Abel

[David Wojick]

I wonder if revenue diversification has anything to do with it? There is a lot of talk about university cutbacks. Gold OA is a different revenue stream.

David

On Jan 5, 2021, at 10:42 PM, Glenn Hampson <gham...@nationalscience.org> wrote:



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[JJE Esposito]

Thank you, Glenn, for the clarification, and my apologies to Abel for not getting his point the first time around.

Wiley is not going to slow down OA shifts. If anything, they will accelerate it. This is because OA disproportionately hurts the businesses of its rivals, including Elsevier, but also including society publishers, whose ability to work in an OA world is challenging. Society publishers will be losing market share, and OA is one of the reasons (not the only one). Note also that Wiley paid $300 mm for Hindawi. That is not pin money even for Wiley. They will be looking for a large return on that investment. Simon's comment on this thread is, I believe, wholly accurate.

I note (saw the link on Twitter last night) that a Wiley representative said that the Hindawi acquisition will help shape Wiley's progress in China. So the move is both geographical as well as strategic from the point of view of the business model.

But has anything changed? I don't think so. Can and will Wiley do a better job at increasing the share of OA material than Hindawi? Yes. But Hindawi was going to be acquired by one large company or another (the sale price guarantees that there was competition), so this particular deal seems to me to be irrelevant for the growth of OA. It was happening anyway. The difference is that Wiley will book the revenue instead of someone else.

We shall see. The other players in this market have not disclosed all their cards. Wiley may not manage the acquisition well; that happens sometimes. Or the market may shift. Or funders will begin to worry about the fate of professional societies (though that would require a degree of imagination that none have displayed to date). Or the world may become skeptical about the sheer flood of under-edited material flooding the channels. We can add dozens of bullet points to this list. The probable direction, though, is toward cooptation of OA by large commercial entities. That's where I would put my money.

Joe Esposito

[Lisa Hinchliffe]

"Wiley is not going to slow down OA shifts. If anything, they will accelerate it. This is because OA disproportionately hurts the businesses of its rivals, including Elsevier, but also including society publishers, whose ability to work in an OA world is challenging."

Thank you Joe. I can't help but be reminded that, as always, we do well to remember that a business mindset framing is very informative for analyzing the industry.

Lisa

P.S. In case anyone is interested, here's the piece with the most extensive comments on the China strategy: https://publishingperspectives.com/2021/01/exclusive-wiley-hindawi-acquisition-jay-flynn-interview-covid19/

___

Lisa Janicke Hinchliffe
lisali...@gmail.com

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[Roger Schonfeld]

On the much-trumpeted China angle of this acquisition -- Hindawi asserts that 65% of its authors "work and live in China" and more than 70% of 2019 revenue came from Asia. It's been notable that there seems to have been little discounting for geopolitical risk, which might seem to be especially acute for a company with zero recurring revenues. .

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[Rob Johnson]

Thanks for the interesting observations on this everyone, the deal certainly piqued my interest. I was prompted to dig up Hindawi's accounts for the last few years, see attached, which are a matter of public record in the UK (the 2019 set are incorrectly labelled 'commercial in confidence'). 

Revenues for the last 3 years were $18m in 2017, $26m in both 2018 and 2019, and then there has been a jump to $40m in 2020, according to the press releases. Profitability has been patchy, but that's not unexpected for a company on a growth trajectory. 

Just to take the car analogy a little further, it's worth reflecting the fact that a valuation of $300m for a company with revenues of $40m equates to a price/sales ratio of 7.5. This is what Tesla was valued at in 2016 (https://stockdividendscreener.com/auto-manufacturers/tesla-stock-valuation-and-market-capitalization/). Tesla's price/sales ratio is now 25 (and firmly in bubble territory in my view) but if you bought in back in 2016 it was a good move. 

Just like Tesla (then and now) the valuation only makes any kind of sense as a technology play and a bet on the future shape of the market being predominantly OA/electric. 

All the best,

Rob

Rob 

Director

Research Consulting

rob.j...@research-consulting.com

@rschrobUK

[Alexander Kostyuk]

Hi Rob,

You have just made an excellent analysis of this deal. A vision from the point of view of finance. You are right - we should not forget that Wiley is an American company, where the company market value is a priority in the business strategy. So, the role of finance is a priority too.

As for the price to sales ratio, I agree - recently it is extremely and I think, abnormally, high. Hindawi is not Tesla, and OA publishing is not the business Tesla is involved from the point of view of the technological revolution. In other case, more technologically driven company - RELX, would buy Hindawi, to support its declaration about an importance of OA publishing and access. But, RELX did not do it. Wiley did it.

Yes, it seems that Wiley overpaid for Hindawi, but I remember that one of the contributors to this discussion mentioned that this is a step by Wiley to deprive its competitors to buy Hindawi in the future. As a result, the deal price is abnormally high.

So, motives of Wiley are rather about competition, then finance and then only about OA. All the rest are just declarations.

In 2021 we will see how Hindawi publishing policies will be adapted by Wiley. There are many differences. For example, APC waiver policy, APC amounts, etc. But whatever Wiley does in this way, the price to sales ratio of Hindawi will not increase. Technologically, Hindawi is not Tesla.

So, let us wait for a little.

Best regards,
Alex

чт, 7 янв. 2021 г. в 11:58, Rob Johnson <rob.j...@research-consulting.com>:

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[Rob Johnson]

Hi Alex,

 

Thanks for the observations, you're right the analogy can only be taken so far and there are many differences between car-making and scholarly publishing, and Hindawi and Tesla.

 

I think we are in agreement that both are subject to the same wider economic forces, which go well beyond OA. As Joe observed earlier, historically near-zero interest rates means a $1 in 5 or 10 years is worth almost the same as a $1 now, which pushes up the valuations of technology-led companies on a growth trajectory to these seemingly illogical levels. Add in the value of taking a competitor off the table, and preventing others acquiring it, plus the benefits to Wiley's wider business when it comes to accessing the Asian market and securing transformative deals, and it makes some kind of sense in the (crazy) world of finance, if not in the schol comm world of static library budgets.  Which as we all know is equally crazy, just in a different way.  

 

Another finance angle on this: Wiley's market capitalisation is currently $2.56 billion, so in the judgement of Wiley's management the Hindawi acquisition will add at least 12% ($300m) to Wiley's stock market value, which is ultimately how its success or failure will be determined. It's highly unlikely this kind of increase in Wiley's market value is going to be achieved through cost cutting or efficiencies, so it assumes a gain in market share and/or increased profitability. These might be accompanied by increased levels of OA publishing, but overall it's hard to see this as a positive development for small publishers or libraries.

 

Rob

[Alexander Kostyuk]

Hi Rob, I agree with your again.

As for the analogy with Tesla...I think it is nit too far to compare Hindawi and Tesla. During last decade many Large Publishers declared their serious aspirations to invest a lot in the technological side of scholarly publishing. Probably, it is time to ask them for reporting in this way and let the stock market assess it? I meant that Hindawi is not Tesla because despite many technology based declarations by Hindawi, they had not introduced any sort of technological revolution to this scholarly publishing market, in contrast to Tesla and its market. Therefore, I think than 7.5 as the price to sales ratio is too high for this deal.

Just one note to do - USD 298 mln. is an evaluation of Hindawi made by Wiley's owners. It is not an evaluation of the stock market in whole. Market has not evaluated Hindawi yet. So, we need to wait during 2021 to see the respond of the market. 

Your sentence "Add in the value of taking a competitor off the table, and preventing others acquiring it, plus the benefits to Wiley's wider business when it comes to accessing the Asian market and securing transformative deals, and it makes some kind of sense in the (crazy) world of finance, if not in the schol comm world of static library budgets". It seems like a well-justified opinion.

Besides that, I am looking forward for the corporate governance issues to be introduced by Wiley at Hindawi after this deal is fixed. It will let me answer all the questions that can still exist about this deal. So, it is a metter of just a few months.

Kind regards,

Alex

чт, 7 янв. 2021 г. в 13:19, Rob Johnson <rob.j...@research-consulting.com>:

[JJE Esposito]

Picking up various pieces of this thread:

Tesla analogy. I introduced the analogy to Tesla for a very specific purpose. I was saying that we don't evaluate Tesla by the colors of their cars. Similarly, we cannot evaluate the value and role of OA in the Hindawi acquisition. It is just not relevant. I was making no comment about Hindawi's technology, about which I know nothing.

Library market. The virtue of OA to publishers is that it provides a revenue stream that is mostly additive to library budgets. Libraries are mostly and increasingly irrelevant for OA. This comment is not one of advocacy but of observation. With OA the center of gravity shifts to funding organizations. Libraries will play a role when their parent institutions provide the funding.

Valuation. Did Wiley pay too much? They paid market price, as there almost certainly was an auction. Since the market sets the price, Wiley paid exactly the right amount. To say that Wiley paid too much means that we assume that the market price will be lower at some point in the future. (How far in the future is an important factor.) For example, Apple's stock as I write this is $131.32/share (up $4.72, which proves that the market likes nothing better than a coup d'etat). Is it overvalued? Well, no: the market price is the value. But will it be worth more in a year? three? five? That's a different matter. To talk about overvaluation means peering into the future. 

Asymmetry of information. I must type that phrase a dozen times a week. The question I have is how can we, sitting outside of Wiley, know as much or more than Wiley about the value of Hindawi to them? Our knowledge is asymmetric. It is common to assert that big companies are stupid, but that does not explain now they got big and how they keep getting bigger. As far as I know, no one participating in this thread, and perhaps no one in this mailgroup, has seen Wiley's internal analysis (effectively, the business plan) for the Hindawi acquisition. So how do we, knowing little, know more than Wiley, which knows a lot? Of course, big companies can get it wrong, and it is heartwarming when the little guy wins. For that reason we tell and retell the story of David and Goliath: we root for David. But over the long run, with a large sample of scuffles to review, it's best to bet on the giant. 

Joe Esposito

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