Simon & Schuster’s Private-Equity Marriage Looks Good on Paper, but Will the Honeymoon Last?

In the newspaper world, a sale to private equity tends to feel like a funeral, with ink-stained wretches lamenting the slow and painful death of their industry. In the adjacent world of book publishing, the news this week that KKR would acquire Simon & Schuster from Paramount Global hardly seemed so grim.

“In the spring of 2023, we began a series of fascinating and stimulating conversations with members of KKR’s Media and Entertainment industry team about every aspect of our business, reflective of their keen interest in acquiring our company. All of us from Simon & Schuster who participated came away from those conversations impressed by KKR’s acumen, as well as their team’s desire to help our business grow and thrive in the future,” S&S boss Jonathan Karp wrote in a company-wide email Monday afternoon, right as the sale was announced ahead of Paramount Global’s latest quarterly earnings call. “That commitment to growth is one of the reasons I’m so glad KKR will be our next owner.”

Karp, who is one of the most successful people in publishing, has good reason to celebrate on a personal level. If S&S had gone to, say, HarperCollins, it’s possible he might have found himself the odd man out. In either case, of course Karp was going to convey an upbeat assessment to his 1,600-plus worker bees, who have essentially spent the past two and a half years in limbo. It began in late 2020, when S&S’s parent company—then known as ViacomCBS—struck a deal for the publisher to be sold to Penguin Random House, the biggest of the Big Five publishers. The Biden administration challenged the deal, leading to a protracted legal battle between PRH and a consolidation-averse Department of Justice. The showdown culminated last fall when a federal judge ruled in favor of the DOJ, kiboshing the acquisition once and for all and sending Paramount Global back to the drawing board. In this sense, anyone employed by S&S is probably just relieved to finally know who their new overlords are going to be.

Still, there’s reason to believe that Karp’s happy talk isn’t just hot air. Exhibit A: the involvement of Richard Sarnoff, who leads KKR’s media and entertainment team. Sure, Sarnoff’s undergraduate art history degree from Princeton suggests he’s a cultured fellow and not just some soulless finance shark. But it’s a different notch on his résumé that is most germane to the matter at hand: Sarnoff himself is a former book-publishing executive, serving in the early 2000s as chief financial officer of, ironically enough, Random House. (He also chaired the Association of American Publishers during that time.)

As far as I can tell, the man has a good rep. Sources in the know described him as “very smart,” a “great guy,” and a “book person.” Karp, who overlapped with Sarnoff at Random House (where Karp eventually rose to editor in chief) was similarly effusive in his company note: “I have known and admired…Richard Sarnoff for two decades…. Richard understands the nuances of the book business as well as anyone I know.”

Sarnoff told the Associated Press that no layoffs are planned, and in his own boilerplate message about the sale, he declared, “We see a compelling opportunity to help Simon & Schuster become an even stronger partner to literary talent by investing in the expansion of the company’s capabilities and distribution networks across mediums and markets while maintaining its 99-year legacy of editorial independence.”

The icing on the cake is that the S&S crew will get an ownership stake once the sale closes. (And it is expected to close this time, since KKR ownership won’t raise the kind of antitrust alarms that a rival major publisher would.) For context, as part of KKR’s flip of the audiobook company RBmedia, now being offloaded to the investment firm H.I.G. Capital, the average payout once the ink dries is expected to be a year’s pay or a minimum of $50,000. Here’s Karp again: “Of all the prospective buyers we spoke to—and there were a lot of them—KKR was the only one that discussed its plans to support Simon & Schuster in creating an equity ownership program to provide all of our employees with the opportunity to participate in the benefits of ownership after the transaction closes.”