Articles Tagged with Houghton Mifflin Harcourt

HAG16Over the past couple of decades education publishing has been characterized by waves of consolidation into a handful of giant conglomerates. This is a typical pattern in an industry as products commoditize.

If products are effectively interchangeable (commodities) competitors gain competitive advantage through industrial scale cost management (economies of scale). Bigger warehouses, off-shoring production, distribution networks built on fleets of professional salespeople, and access to capital drove smaller players into the arms of Pearson, McGraw-Hill, Houghton Mifflin (Harcourt), and Scholastic.

We can see that they became huge – but what were the market forces that drove them to do this?

042_podborkaMoodys* has completely withdrawn credit ratings for Houghton Mifflin Harcourt (HMH) after downgrading it to high risk just last month. This action means Moodys believes there is a high probability of default. From a practical standpoint this means that it will be harder and more expensive to service the company’s $6.7 billion in debt on $2.1 billion in revenue.

According to the Irish Times the rationale was:

“the business risk and competitive position of the company versus others within its industry; the capital structure and financial risk of the company; the projected financial and operating performance of the company over the near-to-intermediate term, and management’s track record and tolerance for risk,”