Yesterday’s news that Clarivate will acquire ProQuest, valued at $5.3 billion, is the largest transaction in recent memory in the scholarly information sector. Both companies are intermediaries — they each work extensively with publishers and libraries — and each has extensive interests in discovery, a lynchpin service in the research ecosystem. Will this transaction result in dramatically strengthened products and improved services for researchers, as its proponents foresee? Or will it result in information enclosure, lock-in, service deterioration, and price increases, as detractors forewarn? One thing is for certain: In Clarivate CEO Jerre Stead’s proclamation that “enterprise software is the fastest growing library market,” we can see the monetization of Lorcan Dempsey’s wry observation that “workflow is the new content.”*
Much about this transaction comes as no surprise. Since it went public, Clarivate has been pursuing an acquisitions-fueled growth strategy, including the purchase of CPA Global for its intellectual property business. At the same time, ProQuest has been bulking up, most recently through its acquisition of Ex Libris and Innovative, and many suspected that its private owners were seeking an exit strategy. ProQuest is largely an academic library vendor with 92% of its $876 million in revenue recurring or reoccurring, “a 100% renewal rate among [its] top 2500 customers,” and a 29% EBITDA.
While no specifics were given, it seems clear that ProQuest will eventually join Clarivate’s Science business, which is led by Mukhtar Ahmed, who replaced Annette Thomas and was an active participant in yesterday’s investor call. The portfolios of Clarivate and ProQuest have a basic complementarity to them, though they also diverge in some notable areas.
The clearest alignment is in research related products that face towards academia. Clarivate offers not only Web of Science, but also associated properties such as the RIM/CRIS offering Converis and the research intelligence service InCites. ProQuest offers the discovery services Summon and Primo and has been building out a suite of research information and research management products including Esploro, Pivot, and Research Professional. The Alma library platform, which has extraordinary market share among research intensive institutions, provides a strong foundation for additional products and services. ProQuest’s strong technology and product teams in these areas, which derive from its Ex Libris acquisition, are surely an important asset in this transaction and it will not come as a surprise to see them influencing the development of the Web of Science suite of services in the coming years. I expect to see service improvements and integrations for products for researchers and the research enterprise, anchored by a continued effort to seek additional revenues outside the library.
ProQuest’s primary revenue driver, even if it is not the profit center, is its content business. This includes aggregations, audio/video, datasets, and ebooks, among other elements, broadly valuable for undergraduate education as well as serving focused research areas. Very little of this business is original content, although some of it is exclusive, and much of it is especially valuable to the humanities and social sciences fields, marking out an interesting complement to Clarivate’s emphasis on science. This is a complicated category of product offerings, pressured by library budget constraints and open access initiatives. It is interesting to consider how Clarivate might invest in these content businesses, particularly given the “publisher neutral” approach that Thomas championed.
A few other areas are more of a question mark, and it will be interesting to see how Clarivate will choose to invest in, or dispose of, some of these ancillary assets. While the parties put on a strong game face about the opportunities to provide researcher services from K-12 on up, it is not clear that the content and services that ProQuest provides for school and public libraries really fit into Clarivate’s vision for its Science business. On the other hand, perhaps Clarivate will continue to acquire its way into an expanded position in the educational materials market.
Clarivate also owns important publisher-facing businesses, anchored by the ScholarOne platform, none of which received mention during today’s investor call. The existing synergies between publisher-facing businesses and the Web of Science product suite may be sufficient to justify this work even if it is less of a strategic imperative.
Cultures and Costs
Beyond the alignment of the respective portfolios, there are basic questions about how to operationalize this acquisition.
Clarivate and ProQuest have different corporate mindsets. ProQuest’s main customer base is the library, its products are optimized around library practices and needs, and it has built sales and customer service organizations that engage this community effectively. By contrast, in what was its Web of Science group, Clarivate has been more aligned with scholarly publishing and academic science, has introduced relatively few products to the library market, and has faced some challenges in global sales for new products, for example Converis. To the extent that these different mindsets are a factor, the corporate integration could be a challenge.
Another element of the consolidation is cost cutting, where the parties anticipate $100 million in recurring cuts. One element of this may be some effort to continue reducing existing product duplication. For example, in addition to supporting the two discovery services mentioned above, ProQuest recently elected not to merge its two library systems businesses together but rather to keep Innovative and Ex Libris under separate leadership.
Another important source of cost cutting seems likely to come out of a continued drive to consolidate sales operations, which has already been a priority both at Clarivate and ProQuest. At the same time, they are forecasting revenue growth based on cross-selling opportunities (including with other parts of the Clarivate businesses). Achieving this objective, across two different approaches to sales while reducing sales operations, is no easy task. Thus, one of the key success factors in this acquisition will be the approach taken to the sales organizations.
Many of the most interesting implications of this acquisition are with several competitor companies.
Looking across ProQuest’s platform and content businesses, CEO Andy Snyder sees the “Bloomberg for academia.” Will Clarivate be able to integrate this combination in ways that yield the heft to compete with Elsevier, ResearchGate, Digital Science, and others that are tussling in the enterprise software, identity management, analytics, and content distribution businesses? How much of a competitive advantage will the combined entity experience by its ongoing stewardship of the Journal Impact Factor?
EBSCO and OCLC are ProQuest’s foremost competitors in the library enterprise software sector, and EBSCO is ProQuest’s foremost competitor in similar content aggregation and distribution segments. OCLC faces a truly formidable competitor in metadata, where ProQuest and open source alternatives are already pressuring it in categories such as ILL and where further developments could threaten its bibliographic utility business. While it is too soon to know if EBSCO’s investments, especially in the FOLIO open source library system, will gain significant market share on ProQuest’s Alma, it is clear that the category is being reshaped significantly.
To be clear: This transaction changes the game of the library software business, making clear that the library system is a higher education system. It thereby validates ProQuest’s strategy of building from Alma to move towards the research office and teaching and learning activities. In the Clarivate-ProQuest landscape, there is the potential for an integrated enterprise research platform offering, in which library systems are a component in a larger suite. Will this vision yield a return in adoption and sales? Will it produce a greater impediment to effective competition by EBSCO and OCLC?
And, what are the specific implications for Digital Science and Elsevier in their strong competition against Clarivate in the provision of tools and services for the research enterprise, with Symplectic and PURE dominating against Converis? Does bringing library systems into this suite (as ProQuest had already begun to do with Ex Libris’ Esploro) offer up any meaningful challenge to them? Will either of these companies be in the market for library systems of their own?
I have followed both companies extensively for years, consulted for both ProQuest and its competitors, and am employed by the same organization that provides JSTOR. I have listened to and indulged in speculation about all manner of possible recombinations, and I have watched as librarians, largely in vain, have tried to resist or decouple from what many see as an increasingly corporatized landscape. But, as the research enterprise takes on a larger role in university strategy, the requisite platforms and tools will only grow in scale. Providing for increasingly sophisticated platforms at scale requires a substantial investment of capital. Organizational forms and business models that can provide for these needs will continue to win out.
* This link originally pointed to a work co-authored by Lorcan Dempsey and Constance Malpas. The direct quote itself originated from the tweet which is now linked above. My apologies for the confusion that I caused.