The control of digital infrastructure has been a vital point of anxiety for academic libraries and scholarly publishers alike. Infrastructure benefits strongly from scale and requires regular reinvestment in order to remain useful and competitive. Some kinds of infrastructure can be maintained by an independent not-for-profit, as is the case with CrossRef and ORCID. Other kinds of infrastructure, such as several of the major hosting platforms, appear to benefit from the kinds of access to capital that the commercial marketplace enables. Last week’s news that a private equity firm, Thompson Street, is now the majority owner of Silverchair, provides an opportunity to reflect on some of the directions we can expect to see for publishing infrastructure.
Catching Up on Silverchair
Many in our community are deeply familiar with content platforms that are utilized by scholarly publishers to provide publishing workflows leading up to and including access to their publications. It could be that one day publishers will no longer each require its own platform as a result of syndication. For now however, only the largest of publishers maintain their own platform infrastructure, while the vast majority of publishers rely on one of a small set of third-party platform vendors. Of these, Silverchair is a leading provider, not only for journals but also for reference materials and books. It works with over 400 publishers, including not-for-profit publishers like scholarly societies and university presses, as well as commercial publishers.
While Silverchair is well known for its publishing platform, it has been moving in several additional directions in recent years, driven in part by societies and other publisher interest in diversifying revenue and building digital alternatives to traditional offerings. The two new directions focus on medical education, where it is providing a learning management system, and meetings, where its focus is on making the content coming out of meetings discoverable and usable.
The investment from Thompson Street will allow it to assume majority ownership of Silverchair. It will also enable Silverchair to accelerate its development in these two segments. A further consequence is Will Schweitzer, until now Silverchair’s Chief Product and Customer Success Officer, is its new president, while Thane Kerner remains CEO. Its “sister company” Hum, which offers a data platform to scholarly societies, is now under separate ownership and leadership.
The marketplace for publishing infrastructure and in particular for hosting platforms is fairly mature and has seen substantial changes in market share in recent years. Atypon was purchased by Wiley in 2016 for $120 million as part of its effort to expand its offerings to societies. PubFactory was acquired by Sheridan in 2017. HighWire, which first defined the category as a subsidiary of Stanford University, was purchased two years ago by MPS for $7.1 million, a shockingly small amount reflecting the trajectory of its market share. There are also open source alternatives, including Janeway and OJS, which are used widely including through a number of hosting services, but which do not yet seem to have substantially impacted the market share of the commercial infrastructure providers. The terms of Silverchair’s investment, including its current valuation, are not being publicly disclosed, but last week Schweitzer emphasized that it was sold for an “industry leading multiple.”
In professional education and scholarly meetings, the marketplaces are less defined and start-ups are making substantial inroads. In the scholarly meetings segment, meeting streaming has been an exploding category with a number of startups as a result of the disruptions of the pandemic.
Succession Planning and Independence
The sale of an independent provider of publishing infrastructure has been a common theme in recent years. The basic reason has tended to be that a founder has retained majority control of a company and at some point wishes to provide for long-term succession. This transition is an expected outcome for any commercially successful, privately-held, founder-run company.
In several cases, as with Atypon as discussed above and the acquisition by Elsevier of bepress, SSRN, and Aries, we have seen strategic acquisitions of shared infrastructure. As Angela Cochran wrote following the acquisition of Aries, these deals can result in greater investment in the infrastructure but also real risks as a result of the loss of independence. And as Lisa Janicke Hinchliffe observed, there is a strategy, at least in the case of Elsevier, to provide a vertical stack of publication services generating value through analytics. Yet as Joe Esposito and I have reflected more recently, consolidation can provide benefits as well as risks.
Another choice is the sale not to a strategic investor but to a financial investor, in which case existing management (including the founder) are more likely to remain active. There are different models for private equity. Some investors want to milk the asset for cash, which can be a disaster for a community dependent on infrastructure. Others wish to invest in it to increase its value, which can be a sort of gift to that community. In either case, eventually, the private equity investor will sell the company, either to another private financial investor or eventually to a strategic acquirer. A company that had been transformative in the library platform segment, Ex Libris, was owned by a succession of private equity firms before being sold to the strategic investor ProQuest, which was in turn acquired by Clarivate.
It is with this context that I spoke last week with Schweitzer about the sale of the majority of the company to a private equity firm. Schweitzer emphasized that the investment ensures that Silverchair will remain “unconflicted,” since it believes that the data and the users belong to its publisher clients, and that indeed “the greatest growth potential for Silverchair is in remaining independent.”
When I asked Schweitzer directly if the owners shopped Silverchair to strategic purchasers, he said they pursued an “inclusive” process. Thus, while Silverchair remains independent for now, what happens to its ownership in the future will of course remain to be seen.
Is there a logical category of strategic acquirer for a company like Silverchair? As mentioned above, HighWire and PubFactory were each acquired by publishing services providers, but it is difficult to imagine a company like that making the level of investment that was probably necessary to acquire Silverchair.
It is somewhat easier to imagine Clarivate, Elsevier, or Wiley, each of which has invested in publisher platforms, making an acquisition at this level. Elsevier was estimated to have spent more than $200 million recently to acquire Interfolio and has pursued a number of nine-digital acquisitions over the past decade, suggesting that Silverchair likely was within reach. Perhaps Elsevier, which already operates its own platform through ScienceDirect, was not interested in such an acquisition. Clarivate, with its neutral position relative to publishers as emphasized by Annette Thomas before her departure, might find a hosting platform to be a natural fit with its ScholarOne business. Yet, given its stock price collapse and the departure of founding CEO Jerre Stead, Clarivate may not have been able to mount a strong bid. Perhaps Wiley could have sought to double down on its Atypon acquisition, and keep its most important alternative out of the hands of competitors, although this seems less likely. The point is that there might well have been strategic interest among the publishing and analytics majors.
For now, Silverchair remains vital infrastructure for some 400 scholarly publishers, which can feel a sense of relief that it remains independent. Founder Thane Kerner has established a succession plan. And, Thompson Street’s investments in Silverchair’s new business directions should add additional value to scholarly societies and others in the sector.
Yet, while celebrating all this, we shouldn’t lose sight of the ways that ownership will change in the coming years. Silverchair will not be owned by an investment-oriented private equity firm forever. Sooner or later, it will likely end up in the arms of another owner, perhaps eventually through a strategic acquisition. We can be philosophical about this and recognize that much else will change in the market also over that period of time, so there may be little sense in worrying about this too much right now. Still, in the long run, the independence of commercially owned community digital infrastructure is never fully guaranteed.